Globalization and Access to Drugs. Perspectives on the WTO/TRIPS Agreement - Health Economics and Drugs Series, No. 007 (Revised)
(1998; 97 pages) [French] [Spanish] View the PDF document
Table of Contents
View the documentAcknowledgements
View the documentAbbreviations and acronyms
View the document1. Speech of the WHO Director-General, Dr Gro Harlem Brundtland
View the document2. World Intellectual Property Organization (WIPO)
Open this folder and view contents3. World Trade Organization (WTO)
View the document4. South Centre
View the document5. Health Action International (HAI)
View the document6. International Federation of Pharmaceutical Manufacturers Associations (IFPMA)
View the document7. International Generic Pharmaceutical Alliance (IGPA)
View the documentOther documents in the DAP - Health Economics and Drugs Series
View the documentBack cover

6. International Federation of Pharmaceutical Manufacturers Associations (IFPMA)

Speaker: Harvey E. Bale

Globalization: pharmaceuticals and vaccines

“Everything that can be invented has been invented.”
Charles H. Duell, US Patent Commissioner, 1899

“We can close the book on infectious disease.”
William Stuart, US Surgeon General, 1969

Thank you Mr. Chairman, other Working Group members and the WHO for this opportunity to present the perspective of the International Federation of Pharmaceutical Manufacturers Associations (IFPMA). IFPMA represents over 55 national industry associations from both developed and developing countries. Companies in membership of IFPMA are the major global research-based pharmaceutical and vaccine companies; but they are also companies which produce a very large volume and value of both generic medicines and non-prescription drugs. In the current research and development pipeline, our industry has over 100 medicines and vaccines for infectious diseases in addition to more than 100 HIV/AIDS related-medicines; over 300 medicines for cancer; more than 90 for heart disease and stroke; and in excess of 300 medicines for diseases that disproportionately affect women.

Innovation leading to new medicines is of crucial importance for meeting public health challenges in both developed and developing countries. Innovation is not a luxury for rich countries but a necessity to fight disease, including where emerging diseases or anti-microbial resistance are present. By permanently bringing to the market new drugs for unmet medical needs, the research-based pharmaceutical industry contributes to enhancing public health throughout the world, including countries where tropical diseases are a special problem.

Globalization has been defined by a Dutch expert on the subject as an “acceleration of something becoming worldwide such that it gives rise to many new phenomena.” One of the most profound effects of globalization insofar as pharmaceuticals are concerned is more research will be done more on a global basis than is the case today - as a result of recent international agreements, particularly the WTO Agreement on Trade-Related Intellectual Property Rights (TRIPS). There is important evidence that this is already happening. In developing countries, local companies are beginning to respond to the new order and are increasing their efforts to find new medicines. For example, in Korea, where patent protection for drugs was introduced ten years ago, a local Korean company executive has written me to say that Korean companies, after overcoming the initial challenges of new patent laws are increasing their drug research budgets and increasing rapidly their patent applications. And in India where infectious diseases are a serious social burden, according to local industry association reports, Indian companies are responsible for most of the increase in pharmaceutical patent filings last year. Indian society and the world will be much better off over the longer term because TRIPS, the WTO agreement on intellectual property protection is encouraging local companies to shift from copying to invention. There is also the positive effect on local production that can come from outside investment. Mexico and Brazil, which recently enacted strong patent protection and provided exclusivity to products in the development pipeline, have seen a rapid rise of investment in its country’s pharmaceutical sector, especially from international companies. Some of the changes in developing countries’ laws are too recent to show data on local investment in research and production, but the experience gleaned years ago from Spain, Italy, Japan and Canada, all of whom have refined and upgraded their pharmaceutical patent laws shows that local producers do not suffer greatly at the same time that increases occur in local research and development. So the experience from both developed and developing countries is positive.

However, while the threat and burden of many diseases has been global, pharmaceutical research efforts have been until now concentrated in relatively few countries. In the future, TRIPS rules can be expected to spread the application of research more globally and involve local companies and countries which have not been part of the effort to discover new treatments, cures and preventive vaccines. Also, international companies can be expected to increase investment and partnerships with locally-oriented companies, where the lack of patent protection and the prevalence of counterfeiting has hindered such activities until now.

The majority of new medicines are discovered, and nearly all such medicines and vaccines, are developed by commercial industry. Industry undertakes the risks of doing multi-year tests on the effective dose, proper indications, and safety profiles of new chemical and biological compounds, and then designs quality assurance systems for manufacture of the medicines - all of this before the medicine is approved (or rejected) by governmental regulatory authorities. The failure rate is high: only 1 medicine receives marketing approval out of more than thousands of compounds screened for therapeutic benefit, and only one medicine out of five entering clinical trials is approved for patient use. Given this and the fact that it takes on average ten years from discovery of a compound to delivery to patients, the drug research and development process is not only risky but it is also expensive. In developed countries the average cost of a new drug today is in the neighbourhood of $500 million. (This means that developing countries, where costs of clinical trials can be less costly, could be attractive for pharmaceutical technology transfer.) It should be added that only a minority of new drugs are profitable and repay their costs, though it is typically impossible to know whether a given compound will be successful 5 to 10 years before it reaches patients around the world. Thus strong intellectual property protection in major developed and developing countries is absolutely essential.

Because many drugs are relatively inexpensive to copy, and counterfeiting is even carried out more cheaply, it is important that strong intellectual property rights apply to pharmaceuticals and vaccines in the important markets in both developed and developing countries. The TRIPS agreement goes far to assure that new medicines will be forthcoming to patients in both developed and developing countries. Patient access to effective therapies is lacking today in countless disease categories, and new diseases are constantly appearing (twenty or so over the past two decades) while resistance to drugs for older diseases such as malaria and tuberculosis is rising. Stronger worldwide patent, trademark and trade secret protection promise to increase access to new therapies to address what are considered incurable diseases today.

What about access to medicines? Will these international agreements have an adverse effect on access to essential medicines? First it can be firmly stated that “access to medicines” is not a one dimensional issue related to price, but is far more complex. Researchers from India recently published a paper entitled “Drug Utilization Patterns in the Third World” and have pointed out that there are many factors affecting access to medicines, including poor management and coordination, misuse of self-medication, low level of public expenditure on health care, lack of basic infrastructure, inadequately trained personnel and poor allocation of financial resources (e.g., between rural and urban areas), including drugs and vaccines, and the lack of adequate health care infrastructure. There are many inexpensive generics on the market today, which raises a question: even if drugs were given away free, how far would this go to solve the access problem? Probably not very far. I wonder if there is not something that we can do to make a difference though. What if WHO and IFPMA were to examine together some of the key issues affecting drug distribution, reducing wastage and improving quality control in least-developed countries, and then exploring how we can work together to improve access?

Secondly, on the question of the effect of new international agreements on the local prices of pharmaceuticals, no generalization can ever apply to every specific situation. However, it can be stated that potential concerns are often not matched by reality. Regarding price effect of patent changes, there is empirical evidence based on actual market studies of the data that it is almost nil or insignificant. This is for a number of reasons. First, patents are not retroactive in effect, thus any product legally on the market at the time that a patent law comes into force is totally unaffected. The important point here is that generic drugs are always available and do exist side-by-side patented products. I am acutely aware of this because many companies in IFPMA are also major generic producers. Also, there is growing competition within therapeutic classes. As the technology improves, there is less real exclusivity in therapeutic clusters, as evidenced most recently with the appearance of multiple patented HIV/AIDS drugs within months of each other. Again, other factors usually have a greater impact on prices including the market structure, existence of distribution bottlenecks and artificial distribution margins, regulatory and tax conditions, inflation, exchange rates and the pattern of drug consumption in various countries.

Thirdly, to indicate that prices are not associated with patent law changes, one need only observe the irony that in some countries which do not have patent protection, the prices of copies are often higher than the prices of the originals. Thus weak or non-existent patent protection is not “consumer-friendly”, and consumers often pay twice - in the lack of reinvestment of profits of copying firms in new drugs and in the often-inflated price of illegitimate copies.

Fourthly, patents do not give create 20 year “monopolies”. Instead, companies face old and new competition in therapeutic categories. And companies also have far fewer than 20 years to exploit their patents. People who understand the industry know that the life of a patent begins to expire long before a pharmaceutical product reaches the patient. This is why Europe, Japan, the United States and Australia have increased the patent life beyond twenty years. But developing countries are not required by TRIPS to do the same.

Finally, beyond these facts, individual companies with new patented products created as a result of the patent system often enter into discussions with WHO and governments to provide donations and other programs to assist in specialized problem categories - recent examples being initiatives with UNAIDS and with onchocerciasis, filariasis and trachoma. On the other hand, companies with an inclination for research into drugs for diseases of the Third World have much less incentive to dedicate themselves to such programs if medicines are internationally diverted through parallel trade - which is a windfall benefit for traders but a hidden tax on poor countries as well as a regulatory nightmare, risking the introduction of substandard and counterfeit medicines into the drug chain.

With regard to the impact of changes in intellectual property laws on local companies, in addition to the benefits to be expected from increased research at a local level, evidence from the experience of developed and developing countries which have adopted stronger patent protection over the past decade indicates that local industry is not made redundant. On the other hand, a strong local or international generic company needs good manufacturing quality assurance programs and the flow of new products coming from strong patent protection in order to survive and grow. The fact is that local industry - and patients - need to be focused more on improving GMPs and quality standards in this new global environment than patent protection because patient safety and global competition dictate higher standards. IFPMA and its members are always prepared to work with WHO and its member states to improve quality standards of pharmaceuticals worldwide. This year we sponsored a seminar on regulatory issues in Hong Kong, involving officials from that region and we will do another one next spring in Singapore.

In conclusion, I raise some questions that we must consider. In 1899, the US commissioner of patents stated that the Patent Office should be closed because, he said, “Everything that can be invented has been invented”. Equally inaccurate was the US Surgeon General who in 1969 testified before Congress that “We can close the book on infectious disease”. As the Danish physicist Niels Bohr once remarked, “Prediction is very difficult - especially about the future”. What about the future, namely of disease and of patents and inventions to fight such disease?

Do we think that there is nothing more to be discovered and developed in the fight against malaria, TB, cancer and AIDS? Do we think that we can close the book on infectious disease? Are we in the fight against disease together for the long-term? Are commercial companies - which have combined science with development expertise to produce drugs for many tropical diseases - partners in public health? If so then we had better recognize that our companies’ contributions through discovery and invention can only be fostered by avoiding threats to the emerging institutions of patent and trademark protections that will be gradually coming into force over the coming decade through international agreements. There are no winners in a game whose goal is to find loopholes in this protection - except those who would drain society of opportunities and skills by copying rather than inventing. The patent system, as the US President Abraham Lincoln once said, has “added the fuel of interest to the fire of genius”. It is the intellectual property system that will increasingly and globally harness more genius to the struggle against disease.

Both the development of and access to medicines is a real issue in today’s global environment. Neither are served by interfering with intellectual property rights. What is needed instead is a long-term global partnership: WHO, industry, national governments and international funding agencies, the WTO and WIPO. All can play complementary roles in doing research and development work, strictly enforcing patent and other intellectual property laws, providing adequate funding in countries which lack adequate resources and improving access though the improvement of local infrastructure.

In conclusion, I thank the Working Group for permitting IFPMA to present the perspective of an industry that in this year will spend over $40 billion in research and development in the search for new cures for old and newly emerging disease. We hope that this dialogue might continue in the coming years. Without decisions being based on dialogue, the commercial industry’s ability to serve public health, and public health itself, will undoubtedly suffer.

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