Sunday, July 29, 2012

"Falsified Drugs", India, EU and the WTO - The next battle?

Mint carried a piece recently on the issue of EU's Directive on falsified drugs and its probable impact on the Indian Pharmaceutical Industry. The EU Directive which was enacted in June 2011 essentially amended an earlier Directive on the Community code relating to medicinal products for human use, as regards the prevention of the entry into the legal supply chain of falsified medicinal products.

The new Directive is found here which amended an earlier Directive. The EU Directive is an elaborate piece of legal rules which mandates the following a particular standard of manufacturing of medicinal drugs which would apply to drugs imported into the EU.

Explaining the rationale of the Directive, the preamble, inter alia, states:
(2)There is an alarming increase of medicinal products detected in the Union which are falsified in relation to their identity, history or source. Those products usually contain sub-standard or falsified ingredients, or no ingredients or ingredients, including active substances, in the wrong dosage thus posing an important threat to public health.

(3) Past experience shows that such falsified medicinal products do not reach patients only through illegal means, but via the legal supply chain as well. This poses a particular threat to human health and may lead to a lack of trust of the patient also in the legal supply chain. Directive 2001/83/EC should be amended in order to respond to this increasing threat."
What is a "falsified medicinal product" as per the EU Directive? The Directive defines a falsified medicinal product as follows:
"Any medicinal product with a false representation of:
(a) its identity, including its packaging and labelling, its name or its composition as regards any of the ingredients including excipients and the strength of those ingredients;
(b) its source, including its manufacturer, its country of manufacturing, its country of origin or its marketing authorisation holder; or
(c) its history, including the records and documents relating to the distribution channels used.
This definition does not include unintentional quality defects and is without prejudice to infringements of intellectual property rights.’"
The Directive lays down that drugs can be imported only if certain good manufacturing practices are followed and the products are accompanied by a written confirmation of a competent authority of the same. These "good manufacturing practices" are mandated in Article 47 of the Directive. Alternatively a country must obtain a declaration as per Article 111b of the Directive from the EU whether that country’s regulatory framework applicable to active substances exported to the Union and the respective control and enforcement activities ensure a level of protection of public health equivalent to that of the Union. In other words, a country intending to export its medicinal products to the EU, must establish that its regulatory framework with respect to good manufacturing practices are in conformity with that of the EU.

A number of points on this issue:

1. Is there a case for challenging the EU Directive as violating the TBT Agreement? Is it an unnecessary obstacle to international trade? Is article 2.2 of the TBT Agreement violated?

Article 2.2 of the TBT Agreement states:
"2.2        Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade.  For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create.  Such legitimate objectives are, inter alia:  national security requirements;  the prevention of deceptive practices;  protection of human health or safety, animal or plant life or health, or the environment.  In assessing such risks, relevant elements of consideration are, inter alia:  available scientific and technical information, related processing technology or intended end-uses of products."
Are the restrictions more trade restrictive than necessary to fulfill the objective of protection of human health. Is the certification procedure and standard unduly burdensome? Is the possibility of potential misuse for protectionist purposes be a ground for a claim that it is more trade-restrictive than necessary?
2. What should India's strategy be? Is not India's national interest in consonance with the interests of the Indian drug manufacturers? Should not there be a strategic agenda to pursue one's interests to protect one's industry? Should there not be a coalition of stakeholders set up to identify "national interest" and chalk out a strategy for pursuing it legitimately at the WTO?

3.Claiming that a particular measure is "protectionist" is quite different from establishing a contravention of WTO obligations of the EU. While the former can have a rhetorical and political pitch, the latter must have sound grounding in the interpretation of the Agreements as well as impact on local industry.

4. Would "protection of human health" be an acceptable exception for the EU to justify this measure? Can India take a stand that the standards prescribed are unduly burdensome and treat developing countries unfavorably since complying with this would make their products, in effect, uncompetitive? Is there de facto violation of national treatment even though on the face of the measure there is no discrimination between imported and local products.

I am not an expert in this field, but I guess this issue would throw open complex questions of the interpretation of TRIPs, TBT as well as the General Exceptions under Article XX GATT.Are we going to see an India EU WTO dispute?

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