USTR Special 301 Report, 2026

In the early 2000s, the United States Trade Representative (USTR) had a broad focus on Indian IP enforcement, comparing it with the minimum standards of the TRIPS Agreement, 1995. In reports from the mid-2000s onward, pharmaceutical patents received some specific attention, subsequently amplified after Novartis. Since 2014, the USTR has reiterated the same concerns in at least 10 out of 13 reports: use of Section 3(d), restrictive patentability standards, threat of compulsory licensing, patent revocation risks, pre and post-grant patent opposition procedures, prosecution delays, lack of data exclusivity provisions (to prevent generics from relying on innovator’s clinical trial data), absence of a US-styled patent linkage (generic’s registration process is linked to, and thus can be stopped by, the innovator’s patent status) and restraint on marketing approvals for generic medicines. 

The USTR Special 301 Report of 2026 places India, again, in the ‘priority watch list’ and repeats the concerns almost verbatim. Allied issues have been flagged relating to counterfeit pharmaceuticals and tariffs in pharmaceutical markets. Contrary to news reporting on this matter (see here and here), compulsory licensing does not feature in this report with the same rigour it did previously for India, and is instead a core issue this time for Colombia.

While the concerns remain substantially the same, the political and economic environment in which they have been raised has changed. First, it is an established fact that the concerns raised relate to the flexibilities that India exercises well within the TRIPS mandate. Any change to increase IP protection, such as a subscription to the TRIPS-plus requirements (see here and here), would be IP maximalism. Second, a renewed policy push in domestic generics production has now strictly aligned this industry with flagship welfare-centric schemes. A change in patent law now would trigger change in the entire socio-economic domestic framework that has evolved around public health measures on access to medicine in the past few years. Third, the stronghold of Indian generics in international medicine trade has flourished. These supply chains, from production to large-scale availability, are also tied to the present system of patent prosecution and market approvals. The decisions that have made this possible are inspirational for south-south policy diffusion and emerging domestic policies of other countries. At the outset, these are good reasons to resist any further legislative and regulatory amendments. However, the domestic enquiry must go further. A more critical look at the state of pharmaceutical patent enforcement in India related to the broad claims of the USTR Report reveals systemic shortcomings. 

Every Agreement Counts!

The Indian patent system, specifically in reference to pharmaceutical patents, has regularly been a politically sensitive topic in trade negotiations. The present concerns of the USTR on Section 3(d), patentability criteria, patent linkage, data exclusivity and voluntary licensing have caused multiple stalemates in parallel negotiations with other Western trade partners. These recent developments are evidence of a changing diplomatic stand, specifically of the DPIIT. Tracking this is important because lowering the patent system’s standard in one negotiation has had a domino effect on subsequent trade deals. 

The India-European Free Trade Association (EFTA) Trade and Economic Partnership Agreement (TEPA) with Switzerland, Norway, Iceland and Liechtenstein came in force in October, 2025.  In the 21 rounds of negotiations that spanned 16 years, there was specific emphasis on generic medicine production. The final language of the agreed annexure remains within the bounds of the TRIPS Agreement, 1995 on matters of public health; however, this does not fully preclude the possibility of a TRIPS-plus agreement in the near future. 

Perhaps the biggest signal of a potential change in the official position of the government comes from news reports on how the DPIIT was in favour of introducing data exclusivity norms for biologics. Such policy posturing contradicts the proposed direction of the Biopharma SHAKTI policy that aims to strengthen domestic biologics production through a substantial financial injection. The DPIIT’s decision was pushed back by the Ministry of Health & Family Welfare, the Department of Pharmaceuticals and the Indian Pharmaceutical Alliance (IPA). 

Crucially, the Record of Understanding leaves open space to re-negotiate on the formation of an Indian regulatory data protection (RDP) system. This re-negotiation is scheduled to happen in 2026. Public records of the meetings that have taken place in February and May, 2026 count the “progress achieved… for taking the agreement from policy framework to commercial delivery” but do not mention if these renegotiations have yet happened.

The India-EFTA TEPA eventually had a major impact on the drafting of the Patent (Amendment) Rules, 2024. As part of the implementation commitments, the requirement of disclosure of foreign filings is relaxed, working statement disclosures are to be made once in three years and what prima facie conditions are required for hearings on pre-grant oppositions is now confusing. There is proof that these changes have had serious and quick repercussions. These faster patent grants, it has been argued, might come at the cost of weaker third-party leverage (see here and here). 

Similar to the India-EFTA TEPA drafts, the leaked draft of the IP Chapter in 2022 in the India-UK Comprehensive Economic & Trade Agreement (CETA) leaned heavily towards TRIPS-plus accommodations. This draft had some alarming suggestions that would effectively neutralise Section 3(d), pre-grant oppositions, patent working disclosure requirement, Section 8 disclosure requirement and provide a term extension to make up for time taken in marketing approvals. The final signed draft of the India-UK CETA completely omitted some suggestions, while others conformed to the patent system changes that the India-EFTA TEPA had already put in place. The CETA came into force on July 15, 2026. 

Unlike the EFTA, in the recent domestic scrutiny conducted in the UK on the CETA, intellectual property norms do not take the centre stage anymore. However, notably, what follows from this to the on-going negotiations with the USA, is that India has given an official preference to voluntary licensing by private commercial contracts. This, in addition to the post-TEPA changes, further reduces the heretofore unapologetic domestic push behind compulsory licensing as an emergency tool to effectuate access to medicines (see here (paywalled)). 

What ails the Indian Patent System? 

Since these amendments are fairly recent, any further change to these provisions should likely not be entertained in the upcoming US-India negotiations. This leaves us with the ever-enduring (see here, here and here) possibilities of changes to Section 3(d), patent linkage and data exclusivity. In addition to this, the American trade policy has turned to aggressive unilateralism on tariffs on generic imports within the bilateral talks. 

The Indian position on keeping Section 3(d) intact has been strong across negotiations; hence, there is hope that the status quo will continue. This provision has been effective in blocking patent grants on trivial modifications to existing drugs, thus restricting ‘evergreening’ of patented pharmaceuticals. It bars the patenting of a ‘known substance’ unless there is proof of ‘therapeutic efficacy’. By obstructing secondary patents for several blockbuster drugs like Venetoclax for cancer, Mavyret for Hepatitis-C, Vymada for cardiovascular conditions, and Bedaquiline for tuberculosis, the decisions of the Indian Patent Office have opened the market for production of affordable generics some years earlier than would have been possible had patents been granted. 

Despite its evidently positive effect on affordability and access, the use of Section 3(d) has its fair share of problems. What precisely qualifies as enhanced therapeutic efficacy, and how a patent applicant may satisfy this condition, are still open questions. One could assume that reliance on clinical data would be sufficient; however, when Markush claims are used, would clinical data be needed for each variable? The jurisprudence on the scope of this provision is not entirely clear and patent rejection reports are not always forthcoming in their details. 

The introduction of data exclusivity, like the proposed RDP, and a patent-linkage system would require a system overhaul. An RDP system would prevent generics producers from relying on the drug innovator’s data. For a majority of generics producers, the independent generation of clinical data would be prohibitively expensive. This is, of course, in addition to the fact that the structure of clinical trials already has lags. Further, the exclusivity period may extend beyond the patent term. It will delay bioequivalent drug development even if the patent in question is revoked. Thus, operating as a second-level market protection, the RDP system could certainly delay generics entry. 

At present, the Central Drugs Standard Control Organisation (CDSCO) permits market authorisations of generic versions of patented drugs based on safety and efficacy. Any patent infringement claim is resolved by the court. An Orange-Book styled patent-linkage mechanism removes this jurisdictional separation and puts the drug regulator in a position to assess patent infringement. This would also delay generics’ entry into the market. Instead of launching after regulatory approval and defending themselves in court if needed, generics producers may be stopped earlier in the process, even if the patent is weak. 

In February, 2026, India concluded a framework for an Interim Agreement with the Trump administration in furtherance of the negotiations on the India-United States Bilateral Trade Agreement (BTA). This framework was supposed to remove reciprocal tariffs on generic pharmaceuticals. With this change in plans, August, 2026 might mark the start a new timeline in which tariffs on generics imports into the USA will go from 0% to 200% after two years. With this recent policy posturing, American negotiation seeks to control both sides of the supply chain – change pushed for the Indian patent law and policy seeks pro-innovator control with possibilities of delayed generics’ entry into the Indian market, at the same time a plan that sets in motion to increase domestic generics production in America. The biggest takeaway from the US-India negotiations shouldn’t be a dilution of our standards; rather, it should be the fact that, above all else, policy positions are meant to protect domestic interests. 

Conclusion 

Trade negotiations are happening against a broader geopolitical perspective marked by domestic trade resilience in an increasingly protectionist global environment. Recent diplomatic developments have been forcing the practical implementation of Western demands into Indian patent law. The USTR Report is admittedly a policy document favouring American goals and demands a repeated addressal of old concerns. Acceptance of such demands that reduce the flexibilities of the present system, and move towards a TRIPS-plus and IP maximalist narrative, is detrimental. 

Any further change in patent regulations should be strongly negotiated with domestic interests in mind. We don’t need another pandemic to understand the practical value of our system’s flexibilities. The simple fact that many in the nation are still without availability, access and affordability to medicines should in itself be seen, and dealt with, as an on-going emergency. 

Changing diplomatic stance from voluntary to compulsory licensing, where private contracts are preferred over government intervention, signals a shift in the policy space in access to medicines that should not be institutionalised. Policy stability needs to hold strong ground on patentability criteria, data exclusivity, patent-linkage, clinical trial machinery and tariffs; while a simultaneous effort at more legal predictability continues. This maintains the Indian patent system’s relevance for transition economies that have looked to us for public-health infrastructure, and helps us as wel to decide our law and policy plan for the upcoming markets in biologics and speciality medicines. 

In the meantime, how far foreign multinational drug makers, like the Organisation of Pharmaceutical Producers, will lobby to influence the DPIIT if the follow-on TEPA negotiations happen is certainly something to look out for. These negotiations, along with the dialogue on the US BTA, will determine the direction of Indian pharmaceutical patent policy this year.

Ambika Aggarwal is a PhD Scholar (IP Law), UGC-NET Junior Research Fellow at NALSAR University of Law, Hyderabad. She is a recipient of the Danida Fellowship on Fostering Innovation and Commercialisation of Intellectual Property Rights awarded by the Ministry of External Affairs, Denmark; and Tech & Innovation Policy Fellowship by SpicyIP and FOSS United. Her areas of interest are intellectual property law, emerging technologies and public policy.