It is now official.

India plans to sue the European Union at the World Trade Organization for allowing big pharmaceutical companies to use the bloc’s tough patent laws to detain generic drugs in transit to developing countries, according to India’s joint commerce secretary Rajeev Kher.

“We see this as an attack on the Indian generics industry, since International law says you can’t stop anything in transit if there’s no evidence that the products aren’t destined for those countries,” Mr. Kher says.

20 Such occasions have been recorded since late last year, wherein border inspectors in the Netherlands and Germany have held up Indian medicines used to treat AIDS, Alzheimer’s disease, heart conditions and other ailments, saying they violated patent law in the UE, although the drugs weren’t intended for sale there, say EU customs officials and lawyers for pharmaceutical companies.

Some shipments have been delayed or held until 8 months and Indian generics makers have been forced to divert shipments at higher cost to transit hubs. These were at the request of Pharma firms including Sanofi-Aventis SA, Novartis AG and Eli Lilly & Co. It has cost them money and they have hired lawyers to defend their right to make the drugs. Eli Lilly is still holding on to the Indian generics drug giant Cipla Ltd’s shipment of a schizophrenia medicine seized in November. . The EU arguments that goods in transit must comply with local regulatory requirements is shaky, says Frederick Abbott, an international trade legal expert at Florida State University.

Trade experts say India would have a good chance of winning. The world’s biggest pharmaceutical firms often told patents on their medicines in the U.S. and EU, which have some of the toughest intellectual property laws. Many of these companies’ patents don’t apply in developing countries, which have kept patent protection weaker in an effort to keep prices low for their far poorer populations. The U.S. isn’t a major transit hub for generics, and doesn’t claim that patent laws should apply to transiting goods.
Weaker patent laws in developing countries allowed India and others to develop a booming business making and selling copies of branded pharmaceuticals, known as the generics, both internally and to other nations. Indian pharmaceutical exports, mostly generics, grew to $4.9 billion last year from $1.5 billion in 2003, according to Global Trade Information Services. Its exports “have become a lifeline for countries that can’t afford brands,” says Sophie Bloemen of Health Action International, an Amsterdam based nonprofit.

An EU regulation adopted in 2003 gives national customs offices the task of policing intellectual property laws on goods entering or transiting through their posts. The goal, EU officials say, was to take a bite out of the world’s 500 billion annual trades in counterfeit goods, which are illegal copies of products masquerading as the real thing, usually of low quality.

The law wasn’t applied aggressively to pharmaceuticals until last year. The EU launched a crackdown aimed specifically at “counterfeit medication, EU official say. In two months, EU officials say, they seized 34 million pieces. In the biggest seizure, at Brussels Airport, officials seized 1.6 million painkillers and 600.000 antimalaria tablets.

However, generic drugs, which are regulated replicas of brand name drugs, are getting caught in the same drugnet.

On Oct. 8, Dutch customs agents at Schipol Airport in Amsterdam intercepted a 50 kilogram, $52,500 shipment of generic blood-thinner clopidogrel, according to papers supplied by the manufacturer, Chandigarh based Ind-Swift Ltd.

Dutch officials analyzed the pills in a mobile laboratory set up to test counterfeit pharmaceutical products and illegal drugs such as cocaine. One ingredient identified the drug as under patent to French firm Sanofi-Aventis. Following the EU’s 2003 law, Dutch customs seized the drugs on behalf of Sanofi.

In two letters, a lawyer for Sanofi told the designated recipient in Colombia that they had violated Sanofi’s EU patent rights. The lawyer invoked a July 18, 2008, Dutch court ruling that the same intellectual property rules must apply to goods in transit as if they had been “manufactured in the Netherlands.”

The second letter, reviewed by the Wall Street Journal, was titled “counterfeit clopidogrel” and threatened “further action” if the goods weren’t destroyed. The claim was settled, and Sanofi consented to the drugs’ release in May, six months after the shipment was seized.

Ind-Swift has since changed the route of all its shipments, sending them instead through Singapore or Malaysia at double the cost, says N.R. Munjal, vice chairman of Ind-Swift. “What the Eu is doing is effectively an antitrade barrier,” forcing up the costs of competitors, he said.

The European Federation of Pharmaceutical Industries and Associations said in a statement that EU countries have the right “to stop products that they suspect may be counterfeit from entering the supply chain. On occasions this will require the temporary detention of some products for the purposes of verification and testing.”

In November, Dutch officials seized two shipments from Mumbai based Cipla, one of capsules of the Alzheimer’s disease medicine rivastigmine and another of tablets of the antipsychotic medicine olanzapine.

Novartis, manufacturer of rivastigmine, asked Cipla to sign a letter admitting that it had infringed on the European firm’s patents and promising that Cipla wouldn’t do so again.

Cipla refused, saying the company believes a shipment in transit can never infringe on an EU patent, said Patsy Jeffrey, who handles legal affairs at Cipla.

The shipment, bound for Peru, was detained for five months, after which Novartis agreed to allow the medicine to continue on its journey. A spokesman for Novartis wasn’t available to comment.

The Peru-bound shipment of olanzapine, the schizophrenia treatment that is one of the biggest-selling medicines in the world, is still being held in Netherlands. Cipla is trying to negotiate the release of the medicine with Eli Lilly, the patent holder in the Netherlands. The medicine has been held for more than eight months, Ms. Jeffery said.

Spokesmen for Eli Lilly were unavailable to comment.
In response to the seizures, Cipla has rerouted a lots of its shipments through other continents and also by sea. “A lot of time is lost if we’re sending by sea,” Ms. Jeffery says.

Dutch officials say they were merely doing their jobs. “We subscribe to the rights of developing countries to have access to this medication,” says Ruud Stevens, a spokesman for the Dutch economic ministry. “But we have to enforce EU patent law.”

EU officials deny they are violating other WTO obligations,” says spokesman Michael Jennings.

After India files its complaint, the WTO could, after a nine-month investigation, dismiss the case, or rule that India has the right to impose retaliatory tariffs on the import of goods from the EU.

Drugs hold-up

India is preparing a complaint at the World Trade Organization against the European union for holding up a shipments of generic drugs to other developing nations. There have been over 20 seizures in the past two years. Some notable ones:

Oct. 8, 2008: Dutch customs hold up a shipment of heart medication Clopidogrel, under patent to Sanofi-Aventis in the Netherlands. The shipment, headed for Colombia, is delayed for seven months.

Dec. 24, 2008: Dutch customs seize blood pressure drug Losartan, under patent to Merck Sharp & Dohme going to Brazil, and hold it for 36 days, before returning it to India.

Feb. 27, 2009: Abacavir sulfate tablets, HIV/Aids medication organized by the William J. Clinton Foundation, bound for Nigeria held up in Amsterdam. Released immediately after the united Nations, the recipient, complained.

May 5, 2009: Amoxicillin, whose rights are held by GlaxoSmithKline, for Vanuatu held by German customs at Frankfurt airport for 15 days.

This is a case to watch. It is just a matter of time where India will prove that it is correct.