The global pharmaceutical sector has changed greatly in the last 10 to 15
years. The expiration of patents on some of the blockbuster drugs has meant that the large
research and development (R&D)-based transnational corporations in the developed world,
which had relied on the sales of these drugs for their profitability, have had to
re-examine their business models and adjust accordingly. Many of them have undergone a
significant reorganization of their operations. Some firms are forming alliances with major generic manufacturers, both in developed countries and the larger developing country
markets. Other are acquiring smaller biotechnology firms with patent applications in the
pipeline, while still others are expanding into related fields such as diagnostics and
other areas. Meanwhile, developing countries that have heretofore not had to offer patent
protection on pharmaceutical products are finding that they must now offer such protection
for new chemical entities as part of their commitments under the TRIPS Agreement of the
World Trade Organization (WTO). These countries, such as India, had developed a large
generic medicines industry based on, inter alia, their ability to reverse engineer
medicaments patented elsewhere, and have been important players in providing other
developing countries with generic medicines. Now, however, these large generic firms in
China and India are becoming increasingly interested in selling their medicaments to
developed country markets, and are beginning to partner with R&D-based transnational
corporations in the sector.
The backdrop to these changes from an LDC perspective is, however, that much
of their population still lacks access to much needed medicines, despite impressive gains
in the availability of certain medicines in the last decade.
The above-mentioned changes in the pharmaceutical industry are impacting LDCs
in two important ways. First, the larger generic pharmaceutical manufacturers in
developing countries have in a number of instances begun to examine the possibility to
engage in foreign direct investment in LDCs to produce medicines while they are
increasingly aiming at selling their own output in more profitable developed country markets.
Second, LDCs are in a good position to take advantage of the fact that, unlike other
developing countries that are Members of WTO, they are exempt from having to offer patent protection on pharmaceutical products until at least 1 January 2016, and perhaps
longer if WTO Members are able to agree on a further extension of the waiver granted to
these countries from having to comply with the TRIPS Agreement.
In order to have a serious chance at benefiting from the current changes and
attracting foreign direct investment in the pharmaceutical sector, however, a number of
important prerequisites need to be met, many of which are lacking in LDCs. It therefore
may not make sense for all LDCs to aspire to be scaling up their local production of
medicines. Furthermore, they will want to ensure that such efforts go beyond a mere
industrial policy, and that the push to support the local production of pharmaceuticals through
foreign direct investment and related technology transfer will address real public
health needs in the relevant country and/or region. Finally, such countries will need to have an
effective promotion strategy that appeals to potential investors.
This guide outlines these recent trends, the basic prerequisites for the
local production of pharmaceuticals and the key points that policymakers and investment negotiators,
especially from investment promotion agencies, will need to keep in mind in
efforts to support this important sector...