Data Exclusivity: Impact of the Malaysia – US FTA

Export oriented policies together with large inflows of Foreign Direct Investment (FDI) have been the main driving force behind Malaysian economic growth. Developed countries have been promoting Free Trade Agreement (FTA) and based on precedent FTAs, the main emphasis is on intellectual property rights, medical technology and pharmaceuticals.

After entering into a Free Trade Agreement (FTA) with Japan, Malaysia immediately turned its attention to the US. Malaysia is already a critical link in the supply chain of many of America’s most competitive companies. Because most Malaysian products and services already enter the U.S. market duty-free, an FTA will level the playing field. However, the discussion between Malaysia and the US came to abrupt end especially as the talks require Malaysia to make tough political choices on some intellectual property issues, one of which being the data exclusivity issue.

Recognized internationally for the first time in the mid 1990s, by the North Atlantic Free Trade Agreement (NAFTA – Art. 1711) and the WTO agreement Trade Related Aspects of Intellectual Property Rights (TRIPs – Art. 39.3), data exclusivity is a relatively new form of intellectual property. Data exclusivity is aimed at protecting and safeguarding pharmaceutical registration files – this data is submitted by pharmaceutical companies to regulatory authorities, such as the US Food and Drug Administration (FDA) and the European Agency for Evaluation of Medicinal Products (EMEA), for the purpose of obtaining marketing approval for new drugs. The underlying logic of data exclusivity suggests that it is an expression of trade secrets, and the period usually demanded of governments to maintain such trade secrets is between 5 to 11 years.

One of the major concerns raised by originator companies is the easy access of the clinical test data to generic drug manufacturers, applying for drugs marketing approval, as the test data was generated after years of hard work and spending millions of dollars.

For a generic drug to enter the market, it must also obtain marketing authorization from the national drug control authority. For obvious reasons, the generic drug manufacturer will not have the capacity to conduct its own clinical trials, and that would also delay the introduction of generic versions, forcing consumers to pay monopoly prices for the patented medicine for the extra period of time. Furthermore, this is unviable for the generic manufacturers as they survive on competitive pricing and low profit margins.

In Malaysia, the National Pharmaceutical Control Bureau (NPCB) under the jurisdictions of the Ministry of Health have to ensure safety and quality of a drug before it is allowed to be marketed in the country. The NPCB in its assessment usually rely on the results of the clinical trials that are submitted by the company commonly known as the originator company, seeking marketing approval.

To obtain marketing approval for a generic drug, all that has to be proven under Malaysia’s current Trade-Related Aspects of Intellectual Property Rights (TRIPS)-compliant regime is that the generic drug is bio equivalent (i.e. works in the body with the same effectiveness) to the original product and therefore clinically interchangeable with the original product in terms of efficacy and safety and meets strict quality standards. Once this has been proven, the NPCB would grant the marketing approval to the generic drug. The generic company does not currently have to submit new safety and efficacy data based on its own clinical trials.

This would all change under a data exclusivity regime introduced by an FTA. Data exclusivity would prevent the NPCB from relying on the originator’s clinical test data in order to register the generic version. This would force generic drug manufacturers to re-conduct the clinical trials, or wait until the data exclusivity period expires. Once the data exclusivity period has expired, a generic drug can be approved on the basis of the original product’s clinical tests; as currently being done in Malaysia in compliance with TRIPS.

Data exclusivity is based on a trade-off demanding that pharmaceutical companies provide data on the safety and efficacy of a new medicine in exchange for treating this data as a trade secret for a limited period. It is additional market protection for originator pharmaceuticals that prevents health authorities, such as the Food and Drug Administration (FDA) from accepting applications for generic medicines during the period of exclusivity.

Consumers and generic drug manufactures are urging to the Malaysian government, especially the Ministry of Health not to allow data exclusivity as Malaysia is under no legal obligation to do so. Signing of an FTA means the adoption of US-similar standards of intellectual property protection, which will lead to devastating consequences for Malaysian consumers and the Government’s health budget.

The Thai Ministry of Health has done a study of the predicted impact of the TRIPS-plus provisions found in US FTAs. It found that if generics were prevented from entering the market for a period of ten years beyond the date as a result from data exclusivity, they would normally begin to compete with the patent holder, which would cost an extra USD5,400 million per year, which is 77% of the current total Thai health expenditure.

There have been appeals for the Government and the Ministry of Health not to give in to the pressures of the multinational pharmaceutical industry as their governments stood firm in not allowing data exclusivity either in the FTAs or anywhere else as part of the law or national policy in the interest of the health and welfare of Malaysian consumers.