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Navigating the minefield

Changes in IP regulation could mean companies are pushed towards more flexible drug pricing in developing countries

A sign saying 'danger, mines'Intellectual property (IP) and the need to protect innovation have always given rise to reputational challenges for large pharmaceutical companies, but how well are the concepts and nuances involved in the communication of IP understood?

Developments in the law and regulation could have an impact on how they protect novel and inventive drugs. From a public policy point of view, since the creation of the World Trade Organization (WTO) and the conclusion of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in 1994, debates on IP have led to questions around access to 'essential' medicines. This article outlines the basic rules governing IP and investigates the implications for the industry.

Understanding IP
The embodiment of IP for the pharmaceutical industry is the patent. Broadly speaking, this is a monopoly right granted for a limited period to the inventor to stop others from making, using or selling the invention without his or her prior permission.

This limited monopoly, granted by the government, has clear benefits to the general public, as it encourages companies to invest in innovation and new product design. A patent not only prevents third party exploitation of the invention, but also gives the patentee the right to claim damages if the patent is infringed. However, the patentee can also sell or license the invention to someone else but retain all the IP rights.

Crucially, there is no such thing as an international patent. The monopoly rights conferred to a patent are limited to the jurisdiction in which the patent is granted. A patent application is generally submitted to a national patent office in a country with a patent system, such as the United States Patent and Trademark Office (USPTO) or the Japanese Patent Office (JPO). In Europe, the European Patent Office (EPO), based in Munich, handles patent applications for countries that are signatories of the European Patent Convention, which include most western European countries.

Although a patent issued by the USPTO and JPO is valid and enforceable throughout the US and Japan respectively, a patent granted by the EPO will be valid in each European country only if the applicant designates the respective country. It is, however, theoretically possible to designate every European country where the patent is granted by the EPO, although in practice, most applicants tend only to choose countries in which it is worth the cost of obtaining protection for the invention. International institutions that are responsible for the administration (not the examination or grant of any patent application) of worldwide patent systems include the World Intellectual Property Organisation (WIPO) and the WTO.

Invention
Generally, an invention is an object such as a machine, a composition of matter, or a process to manufacture a product that is both novel and not obvious to 'one skilled in the art'. What can and cannot be patented depends on the laws of different national jurisdictions. For instance, although methods of medical treatment and software can be patented in the US, both JPO and EPO would disallow or restrict the progress of applications based on these inventions.

The novelty of an invention is disregarded if the claimed invention has been previously disclosed anywhere in the world. The concept of 'obviousness' is more subjective and judgement will be used when reviewing the patent based on all relevant prior creations to decide if a claimed invention can be easily inferred (or obvious) from this prior product.

The research and clinical trials costs invested by pharmaceutical companies in drug development represent a large proportion of total investment in a product. A strong IP portfolio and, more importantly, effective protection of IP rights are crucial in ensuring a healthy return on investment. The prospect of profits is often the necessary catalyst in encouraging the inventions of marketable and useful products. Without a functional patent system, pharmaceutical companies would be strongly discouraged to invest in future research and development, thus stunting the progress of both the science behind medical research and the improvement of public health.

Compared with the computer and electronics industries, the pharmaceutical industry faces several unique challenges in protecting IP. The costly and complex infrastructure needed to manufacture electronic products is an immediate deterrent to possible infringers. In contrast, the duplication of pharmaceuticals is much easier, even with restricted resources.

Despite the possibility of obtaining limited extensions, the patent exclusivity for patented pharmaceutical products is shortened by the complex and time-consuming processes necessary to meet safety requirements. In addition, the pharmaceutical industry faces constant challenges from an ethical perspective. These factors add to the complexity of debates regarding the role of pharmaceutical IP protection in developing countries, which generally could not afford newer and more effective treatments at the price paid by more developed nations.

Arguments against the implementation of IP in poorer and developing countries are often raised by humanitarian organisations such as Medecins Sans Frontieres (MSF). MSF argues that in theory, although a patent system encourages investment of resources in making inventions, in reality, R&D is often rare or non- existent for new medicines or medicines for rare or neglected diseases such as Chagas disease and Leishmaniasis that only affect the developing world.

This claim is challenged in the paper 'Ensuring Access to Essential Medicines in Developing Countries' published by the American Pharmaceutical Group (APG), however, highlighting that drugs with relatively low returns have been developed and launched. These include Mectizan for 'river blindness', Mycobutin for leprosy, Vibramycin for malaria and Capastat for tuberculosis.

More contentious is the access to essential and life-saving drugs for deadly diseases such as HIV/AIDS. The defining moment for issues of access to medicine occurred in 1994 following the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) meeting. At its conclusion, the WTO was established to enforce international trade agreements and the Agreement on TRIPS was adopted. TRIPS established a set of minimum international standards of IP protection for the signatory countries, such as the obligation to grant patent protection in all technological fields, including patents for pharmaceutical products and processes.

Article 31 of TRIPS authorises a judicial or administrative authority to issue compulsory licences, which restrict the rights of a patent holder by authorising third parties to make, use and sell patented products without the patent holder's consent. The use of a compulsory licence is only allowed if efforts to obtain a voluntary licence on reasonable terms and conditions are made first. However, this requirement is waived in the case of a 'national emergency or other circumstances of extreme urgency, or for public non-commercial use'.

According to the Doha Declaration, each WTO member has the right to determine what constitutes a national emergency or other circumstance of extreme urgency. The Declaration effectively affirmed WTO Members' rights to protect public health and acknowledged that intentional flexibilities were enacted in the TRIPS Agreement for this precise purpose. As a result, great subjective power is granted to developing nations to decide whether or not compulsory licences should be issued. In the interest of promoting better access to public health, the TRIPS Agreement may have been worded too flexibly, opening up the practice of issuing compulsory licences to possible abuses.

Developing countries must be encouraged to establish local pharmaceutical research companies that focus on diseases affecting local people. For this to succeed, an effective patent system must be in place, national or international IP rights must be enforced and compulsory licensing should be avoided. To promote a more harmonised international IP system, developed countries should provide financial aid or voluntary technological transfers to assist these 'home-grown' pharmaceutical industries. Further, the cost of drug development could be distributed more fairly between consumers and pharmaceutical companies through a tiered pricing system consistent with the means of the poorer country.

If tiered pricing or other voluntary licensing methods are not implemented more readily by pharmaceutical companies, governments from poorer countries may act increasingly within the flexibility provided by the TRIPS Agreement. This has already happened in recent years. For instance, in November 2007, Thailand issued a compulsory licence for Merck's HIV drug, Stocrin, which ultimately gave the country the option of obtaining cheaper generics from India. At the same time, threats of more compulsory licences for Plavix, sanofi-aventis' blood-thinning drug, were also advanced by the Thai government.

Given the large number of HIV-positive patients in Thailand, the enormous cost involved in providing free healthcare for them and Thailand's 'developing nation' status, the granting of the compulsory licence for Stocrin can be accepted as a measure against a 'national emergency'. However, the inclusion of Plavix, a drug frequently prescribed as a preventative measure against cardiovascular disease, which is itself a preventable 'lifestyle' disease, weakens these arguments.

In essence, patents are contracts between the patent holder and society. Therefore, the patent system can be perceived as a tool for public policies. Whether the implementation of the TRIPS Agreement and the Doha Declaration will result in greater access to medicines in the world remains to be seen. Although compulsory licences are technically the last resort afforded by the TRIPS Agreement, their use as a leveraging tool will become more common if patent holders choose not to offer flexibility in the pricing of their drugs.

This economically and morally sound strategy, based on the ability of a country to pay for protected drugs, would not only prevent more abuses of compulsory licences, but may actually widen access to more effective and safer drugs to patients who can least afford such cutting edge treatments.

Keni LeeThe Author
Keni Lee
is a senior medical writer in the Healthcare team at Fleishman-Hillard, London.

He has extensive experience in pharmaceutical IP law from his time working as a biotechnology patent analyst at a top Japanese patent law firm. He has good knowledge of the patent practices of the three major IP jurisdictions (USPTO, JPO and EPO).

Keni was involved in several opposition and appeal cases at the Japanese IP High Court, assisting major pharmaceutical and biotechnology clients to protect and implement their IP rights. Keni studied in France to obtain his PhD in Chemistry. He speaks English, French, Chinese and Malay.

To comment on this article, email pme@pmlive.com

24th March 2011

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