India has once again been placed on the Priority Watch List in the 2026 Special 301 Report released by the Office of the United States Trade Representative (USTR) on April 30. The report highlights concerns about India’s pharmaceutical patent framework and broader intellectual property (IP) system.

The USTR reviewed 25 countries based on their IP regimes. It plans to increase engagement with countries placed on the Priority Watch List. While India remains under observation, Vietnam has been labelled a Priority Foreign Country. This is a more serious designation and can lead to a Section 301 investigation within 30 days. Other countries on the Priority Watch List include Chile, China, Indonesia, Russia and Venezuela.

India has consistently appeared on this list. It was included in 2025 and 2024 as well, and has remained there since the 1990s. The issue stems from long-standing differences between India and the United States over intellectual property policies, especially in the pharmaceutical sector.

The Special 301 process is not legally binding. Experts describe it as an administrative review tool used by the US to apply pressure. It does not lead to immediate penalties. However, it can trigger negotiations, further investigations, and in some cases, trade actions if concerns are not resolved. For India, the report has no direct legal consequences, but it indicates ongoing US scrutiny of its IP policies.

A key concern raised in the report is Section 3(d) of India’s patent law. This provision does not allow patents for new forms of known drugs unless they show improved therapeutic efficacy. The aim is to prevent “evergreening.” This refers to minor changes made to existing drugs to extend patent life without offering real medical benefits.

India has defended this provision. It maintains that the rule is fully compliant with World Trade Organization (WTO) obligations. Indian courts have also upheld Section 3(d), stating that it prevents misuse of the patent system rather than discouraging genuine innovation.

The US has also raised concerns about India’s compulsory licensing rules. These rules allow the government to permit a third party to produce a patented product without the consent of the patent holder under certain public interest conditions. The US believes this creates uncertainty for patent holders.

India has responded by stating that compulsory licensing has been used rarely and only in carefully regulated situations. It argues that such provisions are essential to address public health needs when access to medicines is limited.

Another issue highlighted is the absence of data exclusivity in India’s pharmaceutical sector. Data exclusivity protects clinical trial data for a fixed period, even if a product is not under patent. In the US, this protection typically lasts at least five years and can extend up to 12 years for biologics.

India does not provide statutory data exclusivity. This allows generic drug manufacturers to rely on existing clinical trial data to produce affordable versions. According to the Global Trade Research Initiative (GTRI), the TRIPS Agreement does not require such exclusivity. It also noted that introducing it would delay the availability of generic medicines and increase drug costs significantly.

The USTR report also points to enforcement challenges in India’s IP system. These include piracy, counterfeiting and delays in the judicial process. It also mentions the lack of a dedicated trade secrets law, drug price controls, and delays in patent approvals.

India has responded to these concerns as well. It states that trade secrets are protected through contracts and common law. It also defends drug price controls as necessary to ensure affordability for patients. The government has said that steps are being taken to streamline patent processing and reduce delays.

India’s Patents Act, 1970 is designed with public health as a priority. It aims to strike a balance between encouraging innovation and ensuring access to affordable medicines. India is one of the largest suppliers of generic drugs in the world. It accounts for nearly 20% of global supply. Generic medicines often reduce prices by 80–90%, making treatment accessible to a larger population.

The GTRI has strongly supported India’s approach. It described provisions like Section 3(d) and compulsory licensing as essential safeguards. According to the organisation, India has achieved a balance between innovation and access. It also emphasised the need for India to defend its policy choices to protect affordable healthcare and maintain policy independence.

The report notes that US pressure on India’s pharmaceutical IP system dates back to the 1990s. This pressure is largely driven by industry lobbying for stronger patent protections. Despite this, India continues to play a major role in supplying affordable medicines globally.

GTRI also highlighted that India exported medicines worth $9.7 billion to the US in 2025. Most of these were low-cost generics that help reduce healthcare expenses. It warned that accepting US demands could weaken India’s generic drug industry. This could negatively impact patients not just in India, but around the world, including in the US.

It added that accepting US demands would weaken India’s generics industry and harm patients globally, including in the US, and emphasised that “India should avoid diluting key patent law provisions such as Section 3(d) and compulsory licensing under external pressure, and must also ensure that its IPR framework is not weakened through commitments in future free trade agreements.”

Overall, the report reflects continued differences between India and the US on intellectual property rights. While the US seeks stronger protections, India remains focused on affordability and access. The issue is likely to remain a key point in bilateral discussions going forward.