UPDATE 2-India, EU heal drugs seizures dispute with interim agreement

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NEW DELHI, July 28 (Reuters) - India has reached an interim settlement with the European Union(EU) on preventing seizures of generic drugs on EU soil, but New Delhi reserves the right to reopen the dispute if the EU parliament waters down the pact, an Indian trade official said.

Guidelines will now be issued to officials in all the EU’s 27 states on letting Indian drugs pass, Rajeev Kher told reporters in the Indian capital on Thursday. The EU will also push for a new regulation in its parliament, said Kher, who is India’s top negotiator at the World Trade Organisation (WTO).

India brought a case to the WTO in 2010 saying the EU was wrongly stopping and inspecting shipments of generic drugs in transit to developing countries. Some shipments were either destroyed or turned away rather than allowed to continue to their final destination.

India had agreed to resolve the dispute with the EU, its largest trading partner, in December but in subsequent months it has been trying to iron out differences on how EU customs officials should treat Indian pharmaceuticals, Kher said.

“We have agreed to an interim settlement with the EU,” he said. “We will wait for the final settlement,” he added. “We have not lost our right to agitate the matter again.”

Generic drugs have become a hot-button issue in trade relations between India and the EU, who are working to conclude a free trade deal this year. Activists accuse both sides of jeopardising India’s thriving generic drugs by agreeing to stricter intellectual property rules in the pact.

Earlier, EU customs officials were seizing Indian drugs on the grounds that they were infringing patent laws on EU territory, Kher said. The first such seizure was by Dutch customs of a blood pressure drug in December 2008.

Now medicines can only be seized if there is a “substantial likelihood” that the drugs will be smuggled into the EU as opposed to shipped onwards to developing countries such as Brazil or in Africa where such patents do not apply, Kher said.

The first seizure prompted activists to say rich countries were supporting drugs companies under the guise of pursuing counterfeits at the expense of poor people’s access to medicine. India has repeatedly said it will not do anything to put its pharmaceutical trade in danger, including in a trade deal.

India will now wait for what kind of regulation the European Union will present in its parliament to replace existing practices. Trade officials have seen a draft, which is not strong enough to satisfy India’s requirements, Kher said. (Editing by Malini Menon and Sugita Katyal)