Trends in Local Production of Medicines and Related Technology Transfer
(2011; 204 pages)

Prepared for the WHO Department of Public Health, Innovation and Intellectual Property by Frederick M Abbott (College of Law, Florida State University).

This report forms part of the project entitled: Improving access to medicines in developing countries through technology transfer related to medical products and local production. It is implemented by the Department of Public Health Innovation and Intellectual Property of the World Health Organization (WHO/PHI) in partnership with the United Nations Conference on Trade and Development (UNCTAD) and the International Centre for Trade and Sustainable Development (ICTSD) with funding from the European Union (EU). The overall objective of the project is to increase access – especially for the poor in developing and least developed countries – to medicines, vaccines and diagnostics.

This report identifies and analyses trends in the local production of medicines in developing countries and related technology transfer. The objective is to assist the World Health Organization (WHO) in its support for Member States in implementing the global strategy and plan of action on public health innovation and intellectual property with particular reference to the promotion of capacity-building for local production in developing countries. The methodology of research included interviews with a range of stakeholders, including industry actors, operators of product development partnerships (PDPs), government officials and members of public health advocacy groups; review of literature and Internet resources; and participation in meetings with stakeholder groups in Africa, Asia and Latin America.

Local production of medicines may be defined by geography and by nationality of ownership. A pharmaceutical manufacturing facility located in a developing country may be owned by nationals of that country, or it may be owned by foreign investors (including multinational enterprises). Although there are reasons why governments may prefer local ownership of manufacturing facilities, benefits from local production facilities may also arise from investments by foreign nationals. This report identifies potential grounds for preference as between local and foreign investors, but it does not suggest that one type of investor should be favoured over another.

Technology transfer is a broad concept encompassing education and training, direct investment, licensing, movement of people, supply of materials and equipment, and other elements. This report uses a broad definition of technology transfer.

From the perspective of global public health, it is important to distinguish between general industrial policy objectives that may argue in favour of local production of medicines in developing countries, and public health objectives for encouraging local production. From an industrial policy standpoint, establishing local production facilities may generate local employment opportunities, stimulate demand for education and training, increase tax revenues and reduce balance-of-payments outflows. Such benefits are not unique to pharmaceutical production and may arise for many industrial sectors. The objective of production-related industrial policy is typically to establish globally competitive and profitable industries. This is likely to generate indirect public health benefits by generally improving the local standard of living.

From a WHO standpoint, one objective of encouraging local production would be to address the unmet medicines needs of the world’s population. Medicines may be too costly for the local population, or producers may not supply products specifically adapted to local market conditions because of insufficient monetary demand. There may also be unmet needs for local sources of production that are sufficiently secure and sustainable to address long-term regional medicines demand that will continue to place strain on public health budgets.

Local production may present disadvantages compared with importation when local manufacturing cannot be undertaken reasonably efficiently, and when local procurement costs exceed costs of importation for a significant period of time. With certain possible exceptions, governments are unlikely to support uneconomic production for sustained periods...

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