Pharmaceuticals before and after TRIPS

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Pharmaceuticals before and after TRIPS

• Sudip Chaudhuri
• Professor of Economics
• Indian Institute of Management Calcutta
• BRICS Workshop, Aalborg
• 12-15 February, 2006

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The Context in Pharmaceuticals

• MNCs huge spenders on RD
• Get new drugs patented and charge high prices
• MNCs consider patents as fundamental for their
  RD efforts

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But in Developing countries

• the patent system did not play much positive role
• In fact its abolition in India has been highly
  beneficial

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India provided product patent protection in
pharmaceuticals till 1972

• This did not have any positive effect because
• the MNCs, who held the patents were not keen on
  manufacturing (and RD) activities they
  preferred imports to local production in India
  and
• prevented the Indian companies from doing so by
  using their patent rights.

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As a result

• On the one hand, because of lack of competition,
  drug prices in India were very high.
• On the other hand, India was dependent on imports
  for many of the essential bulk drugs. The import
  dependence constricted consumption in a country
  deficient in foreign exchange and inhibited the
  growth of the industry.

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But since the 1970s

• Remarkable growth in the pharmaceutical industry
  in India
• India and Japan only two countries where western
  MNCs do not dominate
• India net exporter and self sufficient in drugs
• Drug prices among the lowest in the world
• Source of good quality cheap drugs for the rest
  of the world
• India has the largest number of US FDA approved
  manufacturing facilities outside USA.

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Growth of Exports
Source Sudip Chaudhuri, The WTO and Indias
Pharmaceuticals Industry Patent Protection TRIPS
and Developing Countries, New Delhi, Oxford
University Press, 2005.
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Indias transformation

• Using the freedom which countries had before WTO,
  in 1972, the Patents and Designs Act, 1911 was
  replaced by the Patents Act, 1970 and product
  patent protection in pharmaceuticals was
  abolished
• It was not product patent protection but its
  abolition which operated as a pull mechanism in
  India by provided the Indian companies the space
  of operations and the opportunity to develop and
  innovate
• Aided by the push programmes of public
  investments in manufacturing and RD, what Indian
  companies innovated are processes for
  manufacturing. And it is this capability which
  has permitted India to have an international
  presence and be a global source of drugs.

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But under WTO

• Under the Agreements on Trade Related Aspects of
  Intellectual Rights (TRIPS), mandatory for all
  countries to provide product patent protection in
  all products including pharmaceuticals

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One important argument during TRIPS negotiations

• Developing countries too would benefit from
  stronger patent protection because it will
  stimulate private RD investment for developing
  country diseases e.g., leishmaniasis, sleeping
  sickness, Dengue fever, which are neglected by
  the Western MNCs

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What is happening in India?

• Indian private sector has started investing in
  RD for new drugs since the mid-1990s when TRIPS
  came into effect.
• At present there are about 15 Indian companies
  which are involved in RD for development of new
  drugs ( see Table)

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Table RD Expenditure by Indian companies
involved in development of new drugs
Sources Company annual reports and websites.
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Status of New Drug Development programmes of
Indian companies

• Indian companies are not yet ready to undertake
  RD independently
• They do not have all the skills and the resources
  to do so
• Developing new molecules and license out these to
  the MNCs in the early phase of clinical
  development
• As a result Indian companies are not targeting
  the neglected diseases of the developing
  countries but the global diseases which interest
  the MNCs
• While some of the molecules developed at clinical
  trials stages, no new drug has yet been approved
  for marketing.

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Thus TRIPS has not led to much RD for developing
drugs for necessary for developing countries and
neglected by MNCs
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So, what is the future?
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A Possible BRICS Research Project

• Impact of TRIPS
• Response to TRIPS
• Alternatives to TRIPS

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Definition of pharmaceutical Innovation to
include

• Developing medicines suitable for the people
• And also making these available to the people

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Cross country study very important

• Brazil more successful in making drugs available
  (e.g., universal ARVs) and using TRIPS
  flexibilities (e.g., in compulsory licensing)
• Russia ?? (in the past, USSR help was an
  important factor in the growth of Indias
  pharmaceutical industry)
• India more successful as manufacturer of quality
  drug formulations and active ingredients
• China more successful as manufacturer of drug
  intermediates and tackling USA ??
• South Africa The famous Medicines and Related
  Substances Control Act and the withdrawal of the
  law suit by the MNCs

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THANK YOUsudip_at_iimcal.ac.in