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U.S Trade Representative report includes BRIC but doesn’t single out India

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By Mari Serebrov
Washington Editor

Despite pressure from biopharma and other industries to single out India as the worst of the worst in not honoring intellectual property (IP) rights, the U.S Trade Representative (USTR) declined to name the world's biggest exporter of drugs a Priority Foreign Country (PFC), the strongest censure the U.S. can give a trading partner in the annual Special 301 Report.

While noting growing concerns about India's IP environment, the USTR kept it on the Priority Watch List in this year's report, along with China, Russia and seven other countries. Brazil, which rounds out the BRIC nations, is one of 27 countries, including Canada, named to the Watch List.

In the 25 years the USTR has been issuing the report, India has been a regular on the Priority Watch List – except for the three years it was named a PFC. Rather than downgrading it again this year, the USTR hopes to work with India's incoming government to resolve some of the country's IP issues. (See BioWorld Asia, March 12, 2014.)

In addition to government discussions on strengthening IP rights, the USTR plans to facilitate regular exchanges among IP-intensive industries and the U.S. and Indian governments, and work with Indian officials to encourage the private sector to establish an IP-related task force under the U.S.-India CEO Forum. The USTR also will conduct an out-of-cycle review of India's trade practices later this year.

The Pharmaceutical Research and Manufacturers of America (PhRMA), which was one of the industry groups pushing for India to be downgraded, said it continues to "believe that the systemic pattern of undermining patented medicines in India warrants" the PFC status. But the trade group welcomed the out-of-cycle review.

It will "provide for constructive engagement with the incoming Indian government on how to resolve the deteriorating IP environment in India," PhRMA President and CEO John Castellani said. "Nothing less than full engagement in the months ahead is needed to resolve these critical issues."

A major issue is counterfeit drugs. India is the largest source of counterfeit drugs shipped to the U.S., according to the 301 report, which was released Wednesday. The problem isn't limited to India, though. The USTR noted a proliferation of counterfeit pharmaceuticals and medical devices manufactured, sold and distributed in the other BRIC countries, as well as in Indonesia, Lebanon and Peru.

Products from China, for instance, accounted for 93 percent of the value of the patent-infringing products seized by U.S. Customs and Border Protection in fiscal 2013, according to the report. Besides hurting the patent holder's sales, counterfeits can harm patients and damage the brand company's reputation, as when substandard counterfeit semiconductors are unknowingly used in medical devices.

BRIC CHALLENGES

As for the other BRIC countries, China remains on the Priority Watch List and is subject to monitoring, even though its IP environment is improving thanks to more cooperation between the U.S. and Chinese governments. However, the theft of trade secrets continues to be a major concern for both drug and device makers in China.

"Such thefts are occurring not only inside but also outside China for the competitive advantage of Chinese state-owned and private companies," the USTR said. Chinese central, provincial and local governments often require or pressure foreign patent holders to transfer their IP to domestic entities. Other thefts stem from the misuse of information submitted to government entities as part of the regulatory process.

The USTR kept Russia on the Priority Watch List due to a continuing deterioration in the country's IP environment, in which counterfeiting isn't viewed as much of a crime. The misuse of trade secrets is another problem, as Russia has no regulations clarifying protections against the unfair commercial use or unauthorized disclosure of data used to obtain marketing approval for pharmaceutical products.

Similar concerns persist in Brazil, which kept its spot on the Watch List. The USTR was encouraged by Brazil's efforts to cut through its backlog of pending patent applications and step up IP enforcement. The office is monitoring a series of lawsuits filed by Brazil's National Industrial Property Institute seeking to invalidate or shorten the term of certain drug patents.

CANADIAN, EU CONCERNS

Of more concern to industry is Canada. PhRMA had recommended that Canada be downgraded to the Priority Watch List this year because of its policy that erodes the value of drug patents. The policy, established by Canadian courts, requires a drugmaker to have the same breadth of disclosure for utility when it files the patent in the early stages of discovery as it generally would have years later when clinical trials have been completed. Such a standard makes it nearly impossible to defend a drug patent against infringers. (See BioWorld Today, Feb. 26, 2014.)

Following this unique interpretation of utility, Canadian judges have invalidated 18 drug patents so far. Besides hurting U.S. drugmakers, the policy is stifling Canada's own pharmaceutical industry, PhRMA said.

Noting Canada's progress in fighting counterfeit products, the USTR kept the North American country on the Watch List. It acknowledged the problem with the court-imposed patent standard for drugs and said it would keep an eye on future cases.

The USTR also declined to follow PhRMA's recommendation to add the EU to the Priority Watch List. The recommendation was based on the EMA's proposed trial data disclosure policy, government price controls and the lack of timely patent dispute resolution – all of which could reduce the value of patents and create uneven market access for innovator drugs, according to the trade association. (See BioWorld Today, Feb. 14, 2014.)

Rather than listing the EU, the USTR praised it for a proposed directive designed to protect trade secrets from theft and misappropriation. The 301 report does include a few EU member nations on the Watch List, and the USTR said it plans to conduct an out-of-cycle review of Spain's IP environment and trade practices.

TRADE AGREEMENTS

Looking ahead, the USTR said the U.S. will respect the right of its trading partners to grant compulsory licenses for drugs in accordance with the Trade-Related Aspects of Intellectual Property Rights Agreement. It also will respect compulsory licenses for the export of drugs to countries that can't produce the products themselves.

Having said that, the USTR committed itself to a balancing act to ensure future trade agreements are consistent with U.S. IP and health policies while not impeding "its trading partners from taking measures necessary to protect public health."

One of the sticking points in talks for the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership has been the inclusion of 12-year data protection for biologics, which is U.S. law. (See BioWorld Today, Dec. 20, 2013.)