ENIGMA OF INTELLECTUAL PROPERTY RIGHTS:
HOW LONG SHALL WE MISS THE OPPORTUNITIES?
Indian drug industry provides an outstanding example of its distinctive contribution in adapting global technologies for domestic demand through adaptive research in formulation of drugs. This has meant availability of large number of drugs at low cost. Having developed an expertise in reverse engineering, somehow we started to believe that we were capable of being outstanding only in this field of knowledge. Developing new drugs not just for Indian but global market apparently was beyond our reach. Consequently, a dominant opinion against product patent regime got developed in our country. However, success of Dr.Reddy’s lab and Ranbaxy in vying for global space for the locally developed technologies has started to change the mind set. Simultaneously, new partnerships between academic and commercial organisations within and outside the country have started emerging. Many small companies believed that given their limited resources, it will be almost impossible for them to do world class R&D and pursue the path of prosperity through protection of intellectual property rights.
In this paper, I first discuss the key concept of IPR and its relevance for our conditions. I particularly refer to the opportunities that exist globally with specific reference to patent expiration, biodiversity based drug development. I also review the recent trends in filing patents based on herbal resources in US Patent Office during last two years compared to the trends apparent in 1992.
In part two I review the inter-organisational strategies for R and D drawing upon the excellence in informal sector as well as formal sector. Finally, I summarise the strategy that Indian pharmaceutical industry could pursue for global competitive advantage through protection of IPRs without compromising with the goal of universal health for all.
PART I
The basics of IPR
Patent granted by government to an inventor/s signify a contract. In lieu of disclosing the invention, the society allows the inventor to monopolise the commercial returns from the application of the invention for 17 - 20 years. If the inventor chose to use trade secret route of commercialising one’s innovation, the growth of the ideas may suffer. Further, simultaneous development of innovations similar to one’s own may emerge and be protected affecting the interest of the company or the inventor having the trade secrets. Further patenting does not necessarily imply that one should necessarily commercialise. There are examples where companies as well as individuals have given away the rights for wider application of patented technology to WHO or to some other institutions. Thus, if someone opposes patent on ground of its excludability, then one should be clear as to whether the exclusion is deliberate or is it inherent in the nature of instrument. Patents can exclude anybody else from benefiting from the protected technology without a proper licence from the patentee. But this exclusion is subject to the wish and preference of the inventor.
Does patenting inhibit research and development? It could if some of the important processes and products crucial for derivative R&D are sought to be used without due authorisation. Otherwise, the only restriction a patent would impose on derivative R&D is to ensure that either the improvement is made available to the original patenteee through a cross licence or it should be proved that improvement can be operationalised without infringing the rights of the original patentee - a case very difficult to prove. In the case of Zantac discussed herein later, similar dispute had arisen.
What can be patented?
Any product or process or design which involves an inventive, novel and non-obvious step capable of industrial application can be patented.
At least one cell out of the six should be new. That is, a known compound extracted or developed by known method but for a new use can be patented for that purpose. Therefore if a known compound from neem, say azadirachtin extracted by a known process has been used for curing cancer - an unknown use, the patent can be granted for that purpose.
The intellectual property includes copy right, trade mark, industrial design, design of computer chips, etc. But in this paper, the discussion is restricted to product or process patents dealing with drugs only. Before describing the opportunities that exist in developing R and D strategies suitable for filing new patents, I will deal with the opportunities that exist in terminal patents i.e. patents on the verge of expiry.
Opportunities in Expiring Patents:
The opportunities exist not merely to exploit intellectual property for new products and processes but also in benefiting from the technologies of which the patents have expired or are close to expiration. Two of the celebrated cases deal with one of the largest selling ulcer medicine called as Zantac by Glaxo Welcome (GW) and Losec by Swedish company Astra AB.
Normally, companies having a profitable patent would try to extend its life beyond seventeen or twenty years by various derivative patents which protect different hitherto undisclosed elements of the expiring patent. This way, it becomes difficult for any other company to benefit from the expiry of the patent.
The case of Zantac:
Novopharm is one of the major generic drug makers in North America. They announced in July last year their plans to start manufacturing of the generic version of Zantac (R.). Glaxo had filed an appeal against the US Federal Court decision that a generic version of their drug could be produced without infringing on their second patent. Novopharm planned to use the anti-trust and unfair competition laws in US to fight any restriction. GW’s original patent Form 1 would have expired in December 1995 and Form 2 in 2002. Novopharm submitted their Abbreviated New Drug Application (ANDA) to the Food and Drug Administration to produce Form 1 Generic Zantac(R.). In response to this ANDA, GW filed a law suit in July 1994 and charged Novopharm both with patent infringement as well as trade secret theft. Originally, the expiration date of December 1995 of GW’s patent was extended due to GATT. If the current legislation on GATT is passed by US Congress, a generic manufacturer having made substantial investment to market their product could be allowed to do so during the GATT extension period. Incidentally, the manufacturers of Zantac in New Zealand got five years extension from the date 27 July, 1988 and similar extension has been granted for eight years to Astra Loscc. In the case of Zantac, the generic manufacturers requested the Commissioner of Patents who turned down their appeal. The pharmacists or wholesalers were allowed to sell or dispense generic ranitidine product after 17 November, 1996 provided it was made or imported prior to 17 May, 1996.
In the case of Astra, the Judge found that a total of ten years were lost after the patent during the development and getting FDA approval. The Judge decided to extend the patent on Omeprazole because it qualified as an `exceptional’ invention under all three approaches, viz., (i) exceptional inventive ingenuity plus public utility, (ii) exceptional benefit to the public and (iii) inherently requiring longer than usual to get to the market place and therefore decided that an extension of eight years would be appropriate to enable the patentee to be adequately remunerated. The patent No.1902303 will expire on 18 April, 2003.
Profits worth 400 million pounds being at stake GW, decided to use different strategies for settlement of the problem in different case in different countries. Hours before the US trial was to start in 1995 GW, agreed to settle dispute with Genepharm - a generic manufacturer, by paying `a monetary sum .... not considered as material to the GW group’. GW also agreed to sell Genepharm the active ingredient of Zantac for marketing in UK and Australia from 1997. GW earns two billion dollars from US sales. Normally, a generic competition slashes the sale of the branded product by upto 85 per cent. In September 1997 shares of Astra dipped when the market remained unconvinced of the company’s claim that new compound perprazole would compensate for the losses expected after the expiry of Loscc. The company had already applied for patents on perprazole in sixty countries. For the existing drug including Omeprazole, Astra had developed a new tablet form called as multi unit pilot system (MUPS) for which a process patent had been applied in all major markets.
The strategy of Astra was to protect LOSEC drug not just through product patent but also through patents covering formulation, use, intermediates, and processes. These patents might expire between 2005 and 2016.
Lee Adson( 1997) summarises several strategies used by drug industry to safeguard its intellectual property: (a) alter a drug in such a way that it requires a new dosage and then market it as a superior product, (b) create a new delivery system for the same drug, ( c ) switch the drug with FDA’s approval to over-the-counter non prescription formulation.
Several small companies developed a new niche by developing smart delivery systems for existing drugs. Adson describes the case of Samour , Chairman and scientific Director of Macro Chem corp. which developed a chemical that increased the absorption of certain drugs through skin. With this strategy, they do not have to develop statistics for effectiveness of the drug. The existing data is used to file he patent and then commercial arrangements are often struck with original drug formulator so as to share the profits. Similarly the strategy of converting prescription drug to over-the-counter drug has been used very effectively in past. Head and Shoulder off the shelf dandruff shampoo was once a patented drug prescribed by dermatologists. Advil like wise was patented drug. If all these strategies do not work, the pharma companies set up in house generic drug companies to make and market generic drugs not just their own but also developed by others as done by Merck for instance. That obviously means that smaller companies hav eto be so much more smarter. Patent on Valium expired in 1985 and as Adson describes, the strategy of Hoffmann-LaRoche Inc.’s was to meet the burgeoning demand for generic with slight price increase, taking a hit on market share first and then decrease the prices. The after-glow of the brand loyalty helps in compensating decline in profits later with some early increase in profits due to price increase.
Companies try to use political muscle to extend the patent life and thus the role of public of watchdog groups is very important. The case of Proctor and Gamble illustrates this dimension. P and G won FDA approval after twelve years of "study" and filed for extension of patent protection for this period to restore lost time. US congress passed a special patent term restoration for Olestra - the fat substitute developed by P and G. It was so profitable that company went on seeking more and more extension till public objected and the patent was allowed to expire ( Adson, 1997:27). It is argued that 206 year old patent system has contributed to give US economy the competitive edge which several other countries are trying to gain fast. The issue is whither Indian companies will remain also -ran or will they run to win the race?
Where does our competitive edge lie?
Building Upon Biodiversity and Associated Knowledge Systems:
India has about ten percent of the world’s biodiversity wealth but its share in total world trade based on biodiversity as per the recent Exim Ban report ( 1997) is negligible. Ayurvedic medicines export seems also to fluctuate. In 1993-94, our major exports were aimed at USA but in 1994-95 it was Russia which imported the maximum from us. Our exports have steadily increased at about 30 per cent per annum while imports have recently come down ( Exim Bank Report, 1997). The expenditure on R & D by Indian companies has been abysmally low, exceptions apart. As against world average of 12-15 per cent of expenditure on R & D, Indian companies hardly spend about 1-2 per cent on an average. No intellectual property worth any thing can be generated with this kind of investment.
Discussions with Keith Richardson of Derwent Patent Data bases ( one of the leading patent information providers on internet) revealed some interesting problems in analysing the situation with regard to patents on herbal drugs. None of the classification systems used by them (US,IPC,Derwent Classifications) have a classification for this
category of knowledge. There is no way to reliably search via keyword,
Richardson searched on patents mentioning the words "herb# or herbal# or herbal medicine or herbalism or (traditional and (medicine or remedy). He stressed that it was unclear whether a patent containing one of these words actually was a herbal or traditional medicine patent. Nor would every herbal/traditional medicine patent mention one of these words - they might fail to mention any history of the technology in order to obtain exclusive rights. In any case, for getting a general trend he ran the search. There were 4328 patent records mentioning these words in Derwent's World Patents Index (available via the telnet online hosts - STN, Dialog, Orbit or Questel;also available for searching via the Derwent Search Service US703-706-4220). The World Patents Index covers 40 patent- issuing authorities, including the US, EP, PCT, Japan, China, etc. Derwent translate over 16,000 patents a week into English (from over 30 languages).
A: . Ownership of patents that mention the words "herb# or herbal# or herbal medicine or herbalism or (traditional and (medicine or remedy)"
It seems to be mostly individual inventors (last names followed by first initial) There are not many corporate names in this list of the top 100 patent holders compared with other areas of technology. First twenty in the list are given here in Table one.
Table one
RANK # OCC # PATS % PATS PATENT ASSIGNEE
------ ------- ------ ------ ---------------
1 28 28 0.65 TSUMURA & CO
2 24 24 0.55 WANG Z
3 22 22 0.51 INT FLAVORS & FRAGRANCES INC
4 20 20 0.46 LI Y
5 20 20 0.46 NISSHIN FLOUR MILLING CO
6 20 20 0.46 TSUMURA JUNTENDO KK
7 16 16 0.37 UNILEVER NV
8 16 16 0.37 WANG Y
9 15 15 0.35 CHEN J
10 15 15 0.35 UNILEVER PLC
11 14 14 0.32 WANG J
12 14 14 0.32 ZHANG Z
13 13 13 0.30 HASEGAWA CO LTD
14 13 13 0.30 KANEBO LTD
15 13 13 0.30 KAO CORP
16 13 13 0.30 LIU Y
17 12 12 0.28 BASF AG
18 12 12 0.28 FIRMENICH SA
19 12 12 0.28 LION CORP
20 12 12 0.28 NITTO ELECTRIC IND CO
B. THE AVERAGE INVENTOR/COMPANY APPLIES TO 1 COUNTRY ONLY
Derwent updates each patent record each time a patent is published in a new country - giving reliable patent family information.
in 1987 there were 164 patent records containing the words "herb# or herbal# or herbal medicine or herbalism or (traditional and (medicine or remedy)" and 69.51% of them only applied to one country. in 1996 there were 522 patents containing either of these words. 83.72% applied in only one country. but notice some of the higher numbers here
compared to 1987 - some of these patents were applied for in 60+ countries. This would seem to indicate the technology is getting more important. It is very expensive to patent in that many countries - the patentee must feel there is long term viability.
C.IN 1996 CHINA PATENTED THE MOST OF THESE PATENTS - 239 PATENTS OR
45.79% OF THE 522. HERE ARE ALL THE COUNTRIES IN THE GROUP FROM DERWENT;S
DATABASE.
Table two
RANK # OCC # PATS %PATS PUBLICATION COUNTRY
------ ------- ------ ------ ---------------
1 240 239 45.79 CN CHINA
2 132 106 20.31 JP JAPAN
3 62 62 11.88 RU RUSSIAN FEDERATION
4 95 60 11.49 EP EUROPEAN PATENT OFFICE
5 54 51 9.77 US UNITED STATES
6 69 50 9.58 AU AUSTRALIA
7 49 47 9.00 WO WORLD PATENT OFFICE
8 55 45 8.62 DE GERMANY
9 28 22 4.21 ES SPAIN
10 24 22 4.21 CA CANADA
11 21 17 3.26 HU HUNGARY
12 16 16 3.07 ZA SOUTH AFRICA
13 14 10 1.92 FR FRANCE
14 15 9 1.72 GB ENGLAND
15 11 8 1.53 CZ CZECH REPUBLIC
16 8 7 1.34 BR BRAZIL
17 7 7 1.34 RO ROMANIA
18 6 6 1.15 PT PORTUGAL
19 8 5 0.96 NO NORWAY
20 5 5 0.96 IT ITALY
21 5 5 0.96 SK SLOVAKIA
22 7 4 0.77 FI FINLAND
23 4 4 0.77 TW TAIWAN
24 6 3 0.57 AT AUSTRIA
25 3 3 0.57 CH SWITZERLAND
26 3 3 0.57 IE IRELAND
27 3 3 0.57 IL ISRAEL
28 2 2 0.38 BE BELGIUM
29 2 2 0.38 NZ NEW ZEALAND
30 2 2 0.38 SU SOVIET UNION
31 2 1 0.19 CS CZECHOSLOVAKIA
32 1 1 0.19 DD GERMANY
33 1 1 0.19 DK DENMARK
34 1 1 0.19 RD RESEARCH DISCLOSURE
D. IN 1992 THE COUNTRY RANK WAS VERY SIMILAR
The data from Exim Bank and the trends indicated here seem to suggest that we have to be careful in developing our future strategy. China, Japan and Russia are the major countries which seem to show major intellectual Property protection activity. Given the direction of our herbal exports, it seems to corroborate the trend in patenting. Except that China does not need to import herbs from us and instead relies on its internal supply.
But China can become a world leader in herbal drug patents, why can not India ? One obvious answer is that we seems to be more concerned about the adverse effect of product patent regime on our common people than China which incidentally has achieved much higher growth in per capita income in recent years. It is not just the domestic supply of herbal drugs in which China leads but its share of the world
trade also is significant. China produces about US$ 10 billion worth of drugs of which
US$3 billion worth drugs are exported ( Exim Bank, 1997). I disagree with the suggestion fo Exim Bank report ( 1997:33) that given the high costs of developing new drugs, Indian companies can play major role in just "carrying out clinical trials, colelctig and analysing test data from other centres". This is the same story as in software industry. We claim to provide some of the best software programmers in the world but we seem to be satisfied with servicing other’s needs at low level of margins. We do not seem to gather will to introduce our own branded products in global markets. Drug industry can go the same way if our strategy remains what it is at present. Ranbaxy is planning to enter US market under its own brand name next year and that shows its confidence in its ability to deliver.
While the potential of biodiversity based knowledge systems and herbal supply is well recognised, we do not have nay national or industry level strategy even in this field. Let me illustrate:
Lack of Strategy in Biodiversity Conservation and Prospecting:
No major company whether ayurvedic or allopathic, national or international seems to have any plan of sustainable extraction of wild herbs from forest or elsewhere.
Given an extraordinary high price spread from field to firm, the wages paid to local herb collectors are so low that even they do not have nay incentives to conserve diversity
the conservation of biodiversity I have repeatedly argued can not be ensured by keeping people poor. After most poor people do inhabit the regions which otherwise are rich in biodiversity of different kinds ( Gupta, 1990-1996).
there is no national mission to achieve strategic leadership in either certain drug areas in which we have raw material advantage or in which we have domestic unmet demand ( and where our imports are maximum) or in areas in which we have research advantages.
despite public pronouncements , partnership between public, private and NGOs and communities of herbalists have not come about to give us a strategic advantage in conceptualising the heuristics of research. After all, the cost reduction as well as higher hit rate can only be achieved by using different heuristics and not just by doing the more of the same.
The effort in the draft national Legislation on biodiversity