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Europe trade deal could hit Indian generic drugs

Lumkile Sizila, 36, speaks in Khayelitsha near Cape Town, South Africa, Monday, April 26, 2010.

Associated Press | 26 April 2010

Europe trade deal could hit Indian generic drugs

By Erika Kinetz

MUMBAI, India — It took two years of secret suffering and gut-wrenching diarrhea to make Lumkile Sizila face the fact that he had HIV.

Fortunately, there was something Sizila, who lives in Cape Town, could do about it.

South Africa, home to 5.7 million HIV-positive people - more than any other country in the world - gives AIDS patients free drugs, most of which are generics that come from India.

"I used to cry," Sizila said in an interview Monday. "Through education I managed to realize that this was not the end of the world. I could live for many years if I took treatment."

But he may not be able to count on such low-cost treatment in the future.

Critics say a trade agreement now in the works between the European Union and India could make it harder for millions like Sizila across the developing world to get lifesaving drugs.

The deal is taking shape as India tries to transform itself from a generics powerhouse into a base for drug discovery — a trend that could ultimately do more than any trade agreement to curtail its reign as a pharmacy to the poor.

Medecins Sans Frontieres and other advocacy groups, along with Indian businesses, say the stricter intellectual property provisions Europe has proposed will hinder the timely production of low-cost generic drugs in India for use across the developing world.

"The destiny of millions of poor Indians will be decided by some European free trade agreement," said Amar Lulla, joint managing director of Cipla, one of India’s largest generics manufacturers. "If patent rights override patient rights, that’s the end of the story. That would be genocide."

Since the 1970s, India has become a drug producer for the developing world, revolutionizing the treatment of diseases like AIDS, tuberculosis and malaria with low-cost generics. It now makes one-fifth of the world’s generics, according to PricewaterhouseCoopers.

Europe maintains that nothing in the agreement would prevent India from continuing to play this role and that it has no desire to force measures on India that it is not ready to espouse.

"The EU is fully committed to ensuring that people in the world’s poorest countries can access affordable medicines," said John Clancy, the EU’s trade spokesman in Brussels. "Nothing in the proposed free trade agreement would limit India’s freedom to produce lifesaving medicines for export. The EU Commission has even proposed a legally binding clause in the negotiations to this effect."

But such assurances haven’t convinced critics.

Another round of EU-India negotiations is slated for April 28 in Brussels, with the goal of signing a completed agreement by October.

The negotiations have been held in secret. A leaked draft of the negotiating text from February 2009, which the Associated Press has seen, contains controversial measures that would extend patent protection up to five years to compensate for drug-approval delays and introduce the concept of "data exclusivity," which restricts the ability of generics companies to rely on data from brand-name companies, potentially forcing them to do their own costly, time-consuming clinical trials.

The most current draft contains similar provisions, according to people familiar with the document who declined to be identified by name because of the confidential nature of the talks.

Alexandra Heumber, an advocate at Medecins Sans Frontieres in Brussels, said EU guarantees are meaningless unless the measures are removed. "These provisions would delay competition and provide a longer monopoly to the pharmaceutical industry," she said.

Indian businesses worry the agreement will harm domestic generics manufacturers and make medicine more expensive at home.

Amit Mitra, secretary general of the Federation of Indian Chambers of Commerce and Industry, a prominent business lobbying group, said the agreement, as stands, would be unacceptable.

"I am confident our government will not accept something that would harm India’s ability to produce cheap medicine in the generic domain for which it has become internationally known," he said.

Officials from India’s Ministry of Commerce & Industry did not reply to requests for comment.

But European trade talks are not the only thing chipping away at India’s generics industry. The long antipathy between Indian generics companies and multinational pharmaceutical companies is softening, and some analysts say it’s only a matter of time before India itself swings to tighter patent rules.

India became a generics powerhouse because of a 1972 decision by then Prime Minister Indira Gandhi not to recognize patents on drug products.

That allowed Indian companies to legally copycat pricey branded drugs as soon as they came to market, provided they manufactured the drugs in a novel way.

India ended its copycat generics edge in all but exceptional cases in 2005, when it implemented a World Trade Organization guarantee of 20-year patents on new drugs.

"India’s view is it’s time for us to go up the R&D curve," said Sujay Shetty, associate director for pharma at PricewaterhouseCoopers.

He estimates that India’s 10 largest drug companies spent $480 million on research and development in 2008, though none has yet brought a novel drug to market and almost all of the sector’s $20 billion in annual sales still comes from generics.

Indian companies are working more closely than ever with Western pharmaceutical giants, forging research partnerships with companies like GSK, Eli Lilly and Novartis. India has more U.S. Food and Drug Administration approved factories than any other country outside the U.S.

"As the Indian economy develops, local innovation will prosper further and will have to be encouraged," said Bino Pathiparampil, pharma analyst at Mumbai’s IIFL Capital. Stricter intellectual property provisions are "inevitable at some point in time," he said.

In recent years, Europe and the United States have used bilateral free trade agreements to tighten intellectual property rules beyond what is required by the World Trade Organization.

Such measures are designed to bolster innovation and investment, but critics say they have done more harm than good, driving up the cost of medicine in poorer countries without generating much new foreign investment or domestic innovation.

Oxfam found that Jordan’s 2001 free trade deal with the U.S., which called for intellectual property provisions similar to the ones Europe is asking of India, helped drive up the cost of medicine 21 percent.

In its 2007 study, Oxfam also found that data exclusivity delayed generic competition for 79 percent of new medicines that hit Jordan’s market between 2002 and mid-2006, costing the government and consumers between $6.3 million and $22.0 million.

In India the debate over how to balance patents with patients has special importance.

Medecins Sans Frontieres says it buys 80 percent of its AIDS medicines from India. Cipla says it provides medicine to one in three AIDS patients in Africa.

Whether that will be true when Lumkile Sizila needs to start taking a next-generation AIDS drug remains to be seen.

Associated Press Writer Thandisizwe Mgudlwa in Cape Town contributed to this report.