This article highlights the measures adopted by some countries in initiating IPR reforms and enforcement mechanisms to boost industrial growth especially in the pharmaceutical and biotechnology sectors.
The importance and prominence of intellectual property and its indispensability for the economic growth during the last decade has gained momentum.
The reasons can be attributed to the following:
The national economy of India and other fast developing economies are more dependent on knowledge, as goods and services produced and traded between and within countries, is increasingly product of intellectual capital and much less dependent on traditional factors of productivity, such as land and labour.
Secondly the volume of trade between countries has increased dramatically between countries and within countries. Small and medium enterprises, being backbone of many economies use and enact a great deal of intellectual property and so the steps required for protecting, managing and enforcing IP have become vital to the growth of economy.
Thus it is no longer possible for countries to be insulated from latest technology, be in information, renewable and new energy sources, biotech, medicine, drugs and drug devices etc.
The scope and subject matters falling with the meaning 'knowledge' has increased, and, since knowledge is protected in most countries where it has/had originated, the scope of subject matter of IP has increased significantly.
India, once an agrarian economy is now dominated by service sector. The share of the agricultural sector has declined from 40 per cent to almost 17 per cent in 2007. For the same period industrial sector contribution has increased from 25 per cent to 28 per cent, while that of service sector has increased from 31 per cent to 55 per cent.
Level of patent regime and laws amended in IPR can be helpful to provide the necessary fillip and positive thrust to boost a particular sector in the economy, more so when the particular sector is dependent on knowledge, technology, innovation and creativity.
In this context, it will be pertinent to study the international environment, and present study will focus on the measures and steps taken by some countries in the realm of intellectual property and patent laws with a particular reference to pharmaceutical industry.
Jordan
Some years ago, the Hashemite Kingdom of Jordan, had a pharmaceutical sector that employed reverse engineering to create generic drugs at low prices. But Jordan's generic companies had to compete with numerous generic firms all over the developing world; not to mention these in the developed world.
Facing severe economic difficulties, the Jordanian government came up with an economic development plan that included implementation of strong IPR, to foster R&D and expansion of knowledge based economy.
With assistance from US, the government created a world-class patent system through legislation, infrastructure development, and enforcement. Many international pharmaceutical companies established or expanded commercial activities in Amman, including American home products, AstraZeneca, Sanofi-Aventis, Bristol-Myers, Novartis etc to name a few. Jordanian's exports to pharmaceuticals increased from $ 150 million in 1999 to $ 200 million in 2001, a significant increase for a country with a population of 5 million; and the prices for new, patent protected medicines have not exceeded to pre-patent prices; and prices have actually fallen for medicines on the market before patent protection. The generic industry has also benefited from introduction of patent, as the increase in foreign investments has generated work for these companies.
Mexico
A developing economy, with geographical proximity to USA, and one of the signatories of North American free trade agreements, Mexico has close economic ties with US. Mexico first instituted a formal patent system in 1976, motivated by a need to modernize its industries, increase employment opportunities, and improve the quality of products and services. Mexico chose to change the structure of IP laws. In 1987, Mexico began to align its patent system with the international community by amending the laws. When NAFTA came into effect in 1994, Mexican government had changed its philosophy regarding IPR, transferring more rights to the inventor and away from the government.
In 1993, Mexico created 'Instituto Mexicano de la Propiedad Industrial', (IMPI) and its stated purpose is to stimulate creativity, to foster creativity and protect intellectual property rights. Further IMPI, may conduct investigation hold hearing, impose administrative sanction, on patent infringers and even investigate positive criminal violation. As a result of these measures and patent laws the FDI (Foreign Direct Investment) in R&D and pharma facilities increased markedly.
Mexico has become a prime example of trade and foreign investment as catalysts for economic modernization and growth. Using international engagements as anchors to move away from past inward-looking policies, policy makers have induced a circle of deregulation, structural change, growing productivity and higher per capita income that has made Mexico increasingly attractive as trading partner and foreign investment destination.
In 2000, The TRIPS council examined Mexico's IP legislation and Mexico has notified subsequent amendments. In several areas, Mexico grants protection that exceeds the minimum laid down in TRIPS agreement.
Singapore
In 2003, Singapore's Economic Development Board (EDB), lodged a series of cold calls to high level executives in multinational pharma, biotech companies; and after making enquiries and getting answers, got about to improve the patent regime, taxation system and financial incentives for foreign investors. The policy is paying off for Singapore, as pharma companies lined up to announce multimillion dollar investments in the island State. In June 2008, GSK announced an investment of $ 100 mn to expand its existing facilities. In July, Pfizer opened a $ 350 mn plant in Singapore - the company's first large scale API ingredients manufacturing facility in Asia. Also Novartis has entered partnership with EDP for an institute of tropical diseases.
Some of the Singapore's pro-originator patent policies are:
■ Extension of patent term: Intellectual property owners can show that they suffered delays in obtaining patent grant or marketing approval.
■ Singapore government has changed rules on data exclusivity. It will grant data exclusively period up to 5 years, from the date of marketing approval.
■ The government has restricted its own right to use patented invention in extreme situation of national emergency.
In all the total investments from US as a result of these policies and US-Singapore FTA, has been in the range of US $5 billion.
China
In the late 1970's, economic imperatives forced China to accept the need for FDI, and as a result made several economic reforms, and created a transparent and modern legal environment, and a new legislation for protecting IPR; was created virtually from scratch.
By 2000 and 2001, the patent law was amended brought in line with WTO agreement TRIPS. The national working group on IP protection was strengthened in August 2004. Chinese government has realized that massive infringement of IPR may prevent further strengthening of economy and international investment. In response to increasing international criticism the Chinese government has launched a variety of measure to custom/crackdown on IPR violation.
Reformation of court system to improve handling of IPR cases; and in most cities new specialized IPR courts and divisions have been launched.
Further national IPR strategy objectives have been offered, like raise public awareness programme of IPR protection, promote China's participation in setting international standards in IPR, and teach how to deal with disputes, etc. China has also launched, as part of China 2006 IPR action plan nation wide trade fairs, the blue-sky action, to enhance protection of IPR.
Other sources of protection
In October 2003, China launched the China patent protection association, which is controlled by China's patent authority, the State Intellectual Property Office (SIPO), which will provide legal aid services; to its members when they are involved in major patent disputes, and play role different that of judiciary authorities and administrative law enforcement authorities.
Following are few developments as aftermath of the reforms initiated by Chinese authorities:
Everything drug related is going gangbusters in China, last year (i.e. 2006); China grabbed $ 2.2 billion of the global action on drug R&D, by 2010, the country expects that to grow to $ 10 billion, 2 per cent of the planet's total budget.
China's willingness to get aggressive in protecting biopharma's intellectual property is being credited with its surge past India in the total number of completed and ongoing clinical trials. An Indian court's ruling against Novartis on 'Gleevac' is helping accelerating a trend away from the subcontinent. There's no sign that India's generic drug Industry is flagging' though with homegrown companies aggressively going after new markets - including biosimilars. We may be seeing a trend have that will take China forward as a new base for drug discovery work based on high quality and low costs while India sees generics grow ever stronger.
Early raiser - Korea
The benefits of adopting pharmaceutical patent protection in late 1980s were noted in a 1994 study of the organization for economic cooperation and development (OECD), which pointed to substantially increased R&D investment, especially by privately owned, indigenous companies. Local pharma firm in Korea gained strength after patent protection was improved. By 1990, their share of the total Korean pharma market had risen to 89.2 per cent up from 87.3 per cent share that they had in 1986 (before introducing improved patent protection).
The urgency to initiate reforms and have successive action plans to make the Indian environment for international business more competitive can be assessed from the following report by Price Water House Coopers in 2007, which says, 'The Asia pharmaceutical industry seems to be at the centre of the global market, and most pharma companies in the region expect to happen fast'.
'Not-surprisingly China and India lead the list of target countries for expansion with Singapore and South Korea, next in the sights of MNCs, said Mathew Wyborn Asia pacific adviser leader of Price Water House Coopers, He continued MNCs are increasingly interested in setting up more R&D facilities and conducting more clinical trials in certain Asian territories.
Conclusion
From the above discussions, it can be inferred that many countries, of late, have taken measures to strengthen their patent system. The degree of success in actual translation into enforcements have varied from country to country, but countries nevertheless, have geared up to realize that strengthening of IPRs is an important factor to act as an impetus to attract foreign direct investment in pharmaceuticals. The link among the transfer of technology, FDI and strength or weakness of a country's IP regime was clearly identified in a study by the international finance corporation, an arm of the World Bank "we find that strength or weakness of a country's system of IP protection seems to have a substantial effect, particularly in high technology industries on the kinds of technology transferred by US firms to that country." Also, this factor seems to influence the composition and extent of US direct influence there.
It is to be mentioned that amongst the various determinants of foreign investments, the factor of IPR is one of the contributing factors. The various means by which IPR of a country influence and attract foreign investments are subtle and complex. IPR reforms alone are insufficient for generating strong incentives for firms to invest in the country. In the overall context, IPR is an important component of the general regulatory system, including taxes, investment regulation, production incentives, availability of technical manpower etc., in addition to soundness of political and economic stability.
Strong patent protection is a high priority trade issue for pharma industry because their fixed cost of R&D are relatively high, while imitators of patented drugs and chemical do not incur high costs in these industries
Apart from FDI, a patent regime of international standard can provide sufficient impetus to Indian pharma companies to increase their R&D intensity. This aspect can be very beneficial to the Indian pharma industry as a whole in the long run.
The current scenario of patent regime in India that affect the pharma sector can be summarized from the following recent reports from Economic Times: 'The Indian govt has asked the MNCs to launch drugs in India. The move assumes significance as most of the MNCs have stopped launching products in India after 1995 although they are introducing them in other parts of the globe.' Industry sources said that the new patent Act will have to be strengthened before the pharma giants launch their blockbuster drugs in the country. Further the article cites a statement by Novartis MD, "The expectation after the introduction of the Patent law in 2005 was that it would attract a spate of products". But it has not happened. The foreign MNCs will be more open to launching their new molecules when India has world-class IPR in place.
An official under the ministry of commerce and industry told the Economic Times that there have been proposal to scrap the controversial section 3(d) of Indian Patent Act, but that will require Parliamentary approval. But that provision has been a hurdle for not less than 50,000 innovations qualifying for patents. Most of these innovations are improvements, which can't be granted as patents. In fact we have probably the most stringent patent regime in the world.
(The author is associate professor,
Institute of Health Management Research,
Jaipur 302 011)