Intellectual property protection for pharmaceuticals

Intellectual Property Protection for the Pharmaceuticals: An Economic and Legal Impacts Study with special reference toBangladesh and Mali

Mohammad Monirul Azam and Yacouba Sabere Mounkoro

1.      Introduction

Before the creation of the World Trade Organization (WTO) in 1995, individual countries were free to have their own patents laws. But the policy environment has now changed. One of the WTO agreements, the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)[1],binding on all member countries of WTO, basically aims at establishing strong minimum standards for intellectual property rights (IPRs). Apart from patents, intellectual property includes copyrights, trademarks, geographical indications, industrial designs, integrated circuits and trade secrets. Under TRIPS, all the WTO member countries will have to provide product patent protection in all products including pharmaceuticals, within the time specified.

All the agreements of WTO, including TRIPS, came into force on 1 January, 1995. But Article 65.2 of TRIPS permits developing countries, a transition period of five years to implement the provisions of TRIPS. In addition, if a country did not provide product patent protection in any field when TRIPS came into force, then under Article 65.4, she gets another five years (in addition to the five years permissible under Article 65.2) to introduce such protection. But Articles 70.8 and 70.9 of TRIPS put a limitation on the transition periods allowed under Articles 65 for two classes of products - pharmaceuticals and agricultural chemicals. The protection of the rights of the patentees, however is not the sole concern of TRIPS. TRIPS provides flexibilities for governments to fine tune the protection granted in order to meet social and economic goals.

Article 7 of TRIPS on Objectives speaks of the mutual advantage of both producers and users of technological knowledge and stresses the need for a balance of rights and obligations. TRIPS recognises in Article 7 that the protection and enforcement of IPRs should be “conducive to social and economic welfare.” Again Article 8 on Principles, empowers the member countries to adopt measures to “protect public health and nutrition, and to promote the public interest in sectors of vital importance …” and “to prevent the abuse of intellectual property rights by right holders.” Such measures are however required to be consistent with the provisions of TRIPS. The Preamble to the agreement recognises that IPRs are private rights. But it also recognises the underlying public policy objectives and the special needs of the developing countries to have flexibility in implementing the provisions of TRIPS. In the light of certain developments and apprehensions expressed, the Ministerial Conference at Doha adopted a special declaration on issues related to TRIPS and public health in November 2001. The Doha Declaration clarified and confirmed that member countries have the rights under TRIPS to take appropriate measures to protect public health.

In this paper, we will try to shed light on the status and impacts of the pharmaceutical patents in the selected least developed countries(i.e., Bangladeshand Mali) after the introduction of the WTO TRIPS agreement.

2.      Objectives and Scope of the Study

The basic objective of this paper is to examine the suitability of patent protection for the pharmaceuticals in the context of the TRIPS agreement. In the second section we will deal with the issues of argument and counter argument regarding pharmaceutical patents. In the third section we will show the status of pharmaceutical patents in the Least Developed countries(LDC’s). In the fourth section we will evaluate the impacts of pharmaceutical patents both from the perspectives of patent laws and pharmaceutical sectors  in Bangladesh and Mali. In the next section we will try to find out balancing factors between the pharmaceutical patent and the right to health under the spaces available under the TRIPS agreement and outside the TRIPS agreement.

3.      Méthodologies

Due to shortage of time and space, this study mostly based on the secondary data, available online and paper sources and a few interviews conducted by the both researchers.

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4. Argument and counter argument regarding intellectual property protection on Pharmaceuticals

This section explores the grounds on which patent rights are needed for the pharmaceutical industry and the reasons for which such a right is opposed. The following two questions, though in rhetorical language, give a perspective to the issue and highlight the paradox. ‘What if your doctor told you that you are suffering from a life threatening disease but he may not provide you proper treatment because the necessary drug costs ten times more than your monthly salary? What if you were told to go home to die, because no-one is doing research and making medicine for that disease because you and many others who are suffering from this disease may not pay enough for the medicine? The relationship between patent rights and right to health is remarkable because if patents increase prices of the drugs, at the same time, they provide the pharmaceutical industry an incentive to innovation to undertake research for new diseases and develop new medicines.

4.1. Justification of the intellectual property protection for the pharmaceutical industry:

Of the various justifications for intellectual property rights utilitarian rationale, even with inherent problems, is most widely accepted. This is certainly true in case of patent rights for pharmaceuticals.  Even though patent rights result in patentee’s monopoly over the concerned product in the market; in economic parlance they are a source of ‘deadweight losses’[2] and ordinarily, public policy is hostile to monopoly; the justification for tolerating patents is that they provide a desirable return to inventors. By virtue of patents, a patent holder is allowed to recoup research and development costs from the monopoly rents. Thus, the objective is to encourage an investor to incur the cost of innovation by an assurance that his invention would not be copied and sold by competitors immediately, driving down the prices to the marginal cost of producing the product.

There exits an important relationship between a strong patent regime and research and development (R&D) in the pharmaceutical industry. The industry spends a lot on R&D and it views the nature of intellectual property protection as one of the key elements before investing in research and development. The high importance that pharmaceutical industry places on patents has been demonstrated by several studies. Professor Mansfield of the University of Pennsylvania described dependence of pharmaceutical innovation and development on strong patent protection. From a survey of the research directors of 100 American corporations he concluded that in absence of patent, without some period of restricted competition, the developers of new drugs would be unable to recoup R&D and regulatory approval costs, and the incentive to develop new drugs would diminish greatly[3]. It can also be argued that a strong patent system not only stimulates innovation but also a consequent generic competition. If new products do not enter into market the generic industry, which competes on the new commodity, would find it difficult to flourish.

Patent system allows easy availability of information. Without such a system, the spread of information about new discoveries to other firms would be hampered. Patents allow the information to be used as an input into the new research and development and thus, others can build upon it and avoid the replication of research efforts. This area of research and development also differs from most others in that large numbers of inventions will never make it to the market.  The regulatory approval costs also form a large part of the industry’s total production cost. Normally it is after a decade that the pre-clinical and clinical testing phases are completed. R&D and regulatory approval costs are incurred in the main by the company that develops a drug initially—subsequent producers of the same drug face much lower costs. Reverse engineering of pharmaceutical products is considerably easier than for other products. Furthermore, the probability of success for generic drugs is very high.

Moreover, patent rights are also seen as a tool for development in countries because of increase in technology base from funding, local research and the introduction of technology that produces economic growth. Countries with strong patent protection have strong innovative pharmaceutical industry. Some developing countries that are experiencing strong economic growth and which have adopted more effective patent protection in recent years have been witnessing increased drug R&D[4]. For example, Korea is becoming a technology exporter and most of the new patent applications are from local companies.

In contrast, it is said, a weak patent system, or a system that does not protect the patent at all, will have a chilling effect on local scientific and technological capabilities. Thus, the evidence unambiguously indicates the significance of intellectual property rights as incentives for innovation.

4.2. Opposition to pharmaceutical patents:

It is generally recognised that patent protection of pharmaceuticals is imperative in creating incentives for the industry, but there are limitations to this system. The system is designed to encourage the availability of new drugs in the future at the cost of restricting the current availability and use. If looked from an economic perspective the main problem with the patent system is that of calibration.“Patent systems traditionally provide a fixed term of patent, regardless of the type of invention or the costs of innovation that need to be recouped.”The modern patent systems provide a crude way for rewarding inventors in the face of great uncertainty about the optimal rewards in each case.

Arguments against patent protection of pharmaceuticals typically centre on social considerations such as avoiding price increase in health care. Though a variety of factors, such as rational selection and use of drugs; the costs of drug testing and approval; sustainable financing; reliable health and supply system; level of import duties and taxes; and local market approval costs; influence the price of drugs, patent protection does play a role in determining the affordability of drugs. There is sufficient evidence to suggest that the effect of patents on affordability of drugs is significant with drug prices falling sharply when generic substitutes enter a market to compete with drugs upon patent expiry.

Though one can argue that the low income level of the consumers and lack of good medical insurance cover could also influence in lowering the prices of the drugs, the evidence does not support such a proposition. There are valid reasons to doubt if a patent system promotes research in inventing of drugs for diseases more prevalent in the developing countries or more generally tropical diseases. Intellectual property rights are limited commercial rights, essentially economic reward and that the objective of promoting respect for human rights would at best appear to be a secondary consideration[5]. Pharmaceutical research is driven by commercial considerations and if the effective demand in terms of market size is small it is not good commercial sense to invest even in common diseases like TB and malaria[6]. Moreover, companies are accountable to their shareholders and therefore, the needs of the poor in the developing countries, cannot be the guiding motive for undertaking research.

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5. Pharmaceutical Patents and LDC's

Under Article 66 of the TRIPS Agreement, least developed countries are allowed to defer implementing the TRIPS Agreement until at least 1 January 2006. The Ministerial meeting in Doha provided a further 10 year transition period in respect of introducing patents for pharmaceutical products and protecting undisclosed information submitted to a regulatory body to approve such products which is until January 1, 2016 . However, except pharmaceutical patents, all other provisions of the TRIPS agreement is to be implemented by July 1, 2013. It is however noted that the requirement to provide patent protection for pharmaceutical products has already been met by the vast majority of LDC in Africa and Asia. For example, among the African LDC’s Benin, Burkina Faso,Senegal, Sudan, Tanzania, Zambia, Malawi, Mali respectively allowed protection for pharmaceutical patents. Among the asian LDC’s Bangladesh provided patent protection for pharmaceuticals until recent decelaration by the Government prohibiting pharmaceutical patents.

 It is interesting to explore that whether LDC'c are protecting pharmaceutical patents due to their ignorance of waiver by Doha declaration or pressure of transnational Pharmaceutical companies or they are doing this as per obligation of any bilateral or regional agreement having TRIPS plus provisions.

IV

6. Legal and Economic Impacts study in selected countries

6.1. Bangladesh

Bangladesh is a least developed country situated in South Asia. As a least developed country, Bangladesh is exempted from implementing the general provisions of the TRIPS agreement until 2013, and has an extension until 2016 to implement its provisions on pharmaceutical patents (in accordance with the Doha Declaration). However, the country is presently working towards gradual compliance with the TRIPS Agreement pursuant to a bilateral treaty with the EU that requires Bangladesh to amend its national IP regime to conform to the TRIPS Agreement. The EU-Bangladesh Commission is currently negotiating the U.S-Bangladesh Bilateral Investment Treaty where the definition of investment includes the protection of intellectual property. Article 1(c) of the agreement defines investment to include intellectual property protection.⁶ Bangladesh’s Parliament is expected to amend the country’s trademark, patent, and copyright legislations, following a lengthy inter-agency approval and clearance process, in order to make the country’s IP regime TRIPS-compliant.

As part of these obligations, the Law Commission of Bangladesh has formulated a new Trade Marks Law that makes Bangladesh TRIPS-compliant, in consultation with the WIPO, has already promulgated as the Trademark Ordinance, 2008[7].

Similarly, new legislations for Patents and Designs (provisionally called the Patent Law 2007, and the Designs Law, 2007) have been formulated by the Ministry of Industries, which are presently with the Ministry of Law and Parliamentary Affairs for legal vetting, and are expected to be enacted next year.

The Draft Patent Law of 2007 grants an exemption to the pharmaceutical sector, and provides that “It shall come into force at once except the provisions relating to examination, sealing, grant and post-grant matters of the patents relating to pharmaceutical and agricultural chemical products, but excluding the grant of exclusive marketing rights therefore and mailbox filings which shall come into force on and from the first day of January, 2016” (Section 1). In below we tried to evaluate the existing patent regime and pharmaceutical industry in Bangladesh:

6.1.1.      Status of patent protection in Bangladesh

The present patent protection regime comprises the Patents and Designs Act of 1911 (last amended in 2003) and the Patent and Design Rules of 1933. The Act deems patents to be valid for a total of sixteen years (Section 14), calculated from the date of application (Section 7), and allows a further extension of ten years (Section 15(a)(1)). Section 8 contains provisions for opposition to grant of patent (within four months from the date of advertisement of acceptance of application). The law grants both process and product patents on pharmaceuticals.

In fact until recently as per  patent law of Bangladesh pharmaceutical patent is allowed although Bangladesh is not bound to do so until January 1, 2016 as per Doha declaration on the Public Health and TRIPS Agreement. In below we provided a statistics regarding granting of patent in Bangladesh which includes a good number of pharmaceutical patents.

Patents Granted in Bangladesh between 2001 and 2007

Year	Applications Filed						Applications Accepted
	Local	Foreign		Total		Local		Foreign		Total
2001	56		239		295		21		185		206
2002	43		246		289		24		233		257
2003	58		260		318		16		206		222
2004	48		268		316		28		202		230
2005	50		294		344		21		161		182
2006 2007	23 10		287 225		310 325		16 no info		146 no info		162 no info

However,  Non Governmental organisations, public health group, local pharmaceutical industries and civil society groups criticised the provision to grant pharmaceutical patents as detrimental to the public interest and local thriving pharmaceutical industries. Finally, on the basis of public demand and evaluating public interest and interest of local pharmaceutical industries, by a Gazette notification, the government has suspended the issuance of new patent rights of medicines and agricultural chemicals, as the country is exempted from issuing patent registrations until 2016 under a WTO deal[8]. A circular issued by the Department of Patent, Design and Trademarks in January said as per the TRIPS agreement all applications for patents of medicines and agricultural chemicals will be kept suspended until January 01, 2016.It said the previous applications as well as fresh applications relating to patents for medicines and agricultural chemicals will be preserved in a 'mail box' and will be considered after the expiry of the deadline. But once again, the decision has sparked a debate between local and foreign pharmaceutical companies. The government took the decision in the light of the agreement on Trade-Related Aspects of Intellectual Property Rights.

Local pharmaceutical companies that usually produce generic drugs welcomed the decision while the multinationals see it as a barrier to the development of the industry in Bangladesh.The government decision will help local medicine industry, Bangladesh Association of Pharmaceuticals Industries General Secretary Nazmul Hasan said after the notification. He also claimed that earlier patent protection for pharmaceuticals increases products prices.

On the other hand Ashfaque ur Rahman, managing director of Novartis (Bangladesh) Limited(Switzerland based pharmaceutical company), said, “Bangladesh will be benefited in terms strength of the sector if patent registration continues. Other countries will evaluate the situation that Bangladesh has a strong base of patent regime and its products carry specific standards." Patenting of any pharmaceutical process is a must to maintain product standards, Rahman added. Another executive of a multinational company said Bangladesh will not get any new formula because of the suspension. Although in last few years a number of multinational pharmaceutical companies got their drugs patented in Bangladesh, now they will not be able to patent their formula in Bangladesh due to the present notification in line with the waiver given to the LDCs under the WTO agreement.

6.1.2. Status of the pharmaceutical sector in Bangladesh[9]

As mentioned earlier, despite WTO waiver of pharmaceutical patents, it was allowed in Bangladesh until recently although local pharmaceutical companies always pushed the government to implement the WTO waiver. On the other hand there are some foreign pharmaceutical companies in Bangladesh who are interested to take patent of their products not satisfied with recent move of the government.

Bangladesh now exports a wide range of pharmaceutical products (therapeutic class and dosage forms) to 67 countries[10]. The Drug Control Ordinance of 1982 placed a ceiling on selling imported drugs in the local market promoted self-reliance in its pharmaceutical sector, prior to which the local manufacturing catered to only 20 per cent of the total needs. Local exports have risen from USD 0.04 million in 1985 to USD 27.54 million in 2006 (Export Promotion Bureau). As opposed to relying on foreign companies for 75 per cent of their drug supply prior to the Ordinance, local firms now cater to 82 per cent of the markets, whereas subsidiaries of MNCs supply 13 per cent of the market and 5 per cent of the drugs are imported. Square Pharmaceuticals is the largest firm in the market for many years now, and is followed closely by Beximco, Incepta, ACME and Eskayef (IMS, 2006). Other firms in the top ten bracket include Aristopharma, General, Healthcare Pharma, Novartis and Drug International (Ibid.). The market is extremely concentrated: the top ten firms cater to about 70 per cent of the market and only two companies, Beximco and Square hold 25 per cent of the entire market.

Pharmaceutical manufacturing consists of two steps: production of active pharmaceutical ingredients (APIs), which requires chemical synthesis skills and is commonly referred to as ‘reverse-engineering’ capabilities, and final formulations, which is a manufacturing activity and involves the mixing of active pharmaceutical ingredients with other non-active ingredients into pill, tablets, or other forms of administration. Pharmaceutical firms in Bangladesh are mainly engaged in formulation of APIs requiring manufacturing skills only, and are presently struggling to build capacity in the more knowledge-intensive processes of reverse engineering active pharmaceutical ingredients (APIs).

Product range: Approximately 450 generic drugs, in 5,300 registered brands having 8,300 different presentations of dosage forms and strengths are manufactured by 237 registered companies (including 5 multinationals) in the sector. The local companies produce a wide range of products that include antiulcerants, flouroquinolones, antirheumatic non-steroid drugs, non-narcotic analgesics, antihistamines, and oral antidiabetic drugs. I is worth noting that many of the bigger firms are now venturing into the production of anti-cancer drugs, anti retroviral drugs for the treatment of HIV/AIDS[11] and anti Bird Flu drugs.

Firm size: The companies include specialized multinational companies, local large companies with international links and smaller local companies. Out of the 237 registered companies, only around 150 are estimated to be in a functional state.¹⁴The Bangladesh Association of Pharmaceutical Industries (BAPI) is the main professional association for the sector, and has 150 member companies that lobby the government for policy changes, among other activities.

Technologies used: Firms mainly use process development technologies to manufacture generic formulations. The survey shows that the firms import between 75 to 100 per cent of their machinery and 50 to 100 per cent of all production inputs are imported from foreign sources.

Despite very impressive growth over the years, now the pharmaceutical sector inBangladesh suffers from a lack of coherent policy regime. The Drug Control Ordinance of 1982  of  Bangladesh is almost  similar to India’s policy initiative of a similar kind that triggered self-reliance in its pharmaceutical sector, but likeIndia, in Bangladesh  this policy has not been supported by complementary industrial policy measures to support the sector. Even if the new notification under the patent law that incorporates the Doha flexibilities for pharmaceutical patents inBangladesh until 2016 is enacted, strategic policy support is required to promote API and reverse engineering skills amongst local firms, in order  to utilise the flexibilities of the TRIPS agreement and  effectively supply low cost generic versions of patented drugs to other LDCs.

The pharmaceutical sector falls under the Ministry of Health and Family Welfare (MHFW) in Bangladesh, rather than the Ministry of Industry and Commerce (or Ministry of Science and Technology), which is generally the case in other countries. The sector has not been a leading sector in the most recent economic policies that seek to provide a variety of incentives for exports, although the government has enacted a New Drug Policy (2005) and a National Biotechnology Policy (2005), and is in the process of establishing an API park. The New Drug Policy (2005) contains provisions for technology transfer and some other incentives to MNCs to set up production facilities in the country both on a joint venture or independent basis, although it is not clear how this alone will help in the absence of other institutional incentives that promote knowledge intensive activities, such as human skills. The Directorate of Drug Administration is the key department in charge of the sector, and is supported by the Institute ofPublic Health, which has the mandate of supporting public health activities, quality control, and production of biomedicals, training and research. Both organizations are severely under-equipped and under-funded. One of the few services offered by the Directorate is the Bangladesh National Formulary, produced by the Directorate of Drugs Administration which contains a list of all drugs available in the country, with manufacturing details and price.

From the above analysis, we can sum up following propositions on the pharmaceutical patents and allied issues in Bangladesh

a.      Bangladesh allowed pharmaceutical patents until January, 2008. Now it is suspended pharmaceutical patents until January 1, 2016 as per WTO waiver.

b.     Local pharmaceutical companies are providing cheap generic medicines and exporting to a good number of countries, which ultimately contributing for global access to affordable medicines. But they have to invest in R&D considering future competitive environment post 2016 scenario.

c.      Foreign pharmaceutical companies not welcomed the decision of the Government regarding suspension of pharmaceutical patents and consider it may be a barrier for the technology transfer and investment in the pharmaceutical sector in Bangladesh.

d.     Although cheap medicine is available overall health sector inBangladesh is in very poor shape due to lack of proper infrastructure and supervision. Therefore simply non granting of pharmaceutical patent is not enough to ensure right to health.

e.      It is apprehended that post 2016 Bangladesh may face serious problem due to high price of patented medicine. But till date Government is not taking proper steps for capacity building apart from suspending pharmaceutical patent until 2016.

f.       The Government should encourage local pharmaceutical companies, Universities and Research institutions to invest in R&D and to come up with local solutions for common diseases inBangladesh. As foreign pharmaceutical companies may not be interested for producing medicine of common diseases inBangladesh considering unprofitable, local institutions have to come up with solutions and innovative medicines.

6.2. The Context of Mali

As an LDC, Mali is allowed to suspend pharmaceutical patents. But as a member of The industrial property regime of the African Intellectual Property Organization (OAPI), Mali provide protection for pharmaceutical patents. Mali ratified the 1999 revision of the Bangui Agreement on 19 June 2000. The government ofMali is also working to harmonize its intellectual property regime with the requirements of the TRIPS Agreement. The State lacks  both human and financial resources to utilise the TRIPS agreement in general and its flexibilities in particular.Mali has made 2 direct deposits of patent applications by non-residents in 2005 and none has been issued therefore not in force[12].

6.2.1. Status of patent protection in Mali

Patent protection in Mali is governed by the Bangui Agreement of 2 March 1977 and its Annex 1.    The meaning of it:  

« "Can be a patent or a patent confers on its author under conditions and for a time, the exclusive right to exploit the new invention involves an inventive step and capable of 'Industrial application. "  

The applicant for a patent must file its application or submit to the Director General of OAPI which is represented in Mali by Organisation OMAPI.

The invention is then subject to a formal review of its purpose and compliance of the claims, a substantive examination to establish that the invention does not duplicate already granted a patent protected earlier, it is new and involves an inventive step. The granting of patents held by decision of the Director General of OAPI and must give rise to a specification. The patent generates for the recipient an exclusive right to operate for a period of ten calendar years renewable

Legal framework in countries OAPI

The framework of patents in Annex 1 of the Bangui Agreement of 1999 is one kind of "TRIPS plus" provisions obliterating the moratorium for LDCs as allowed by the Doha declaration on the TRIPS agreement and Public Health. There is a lack of clarity of the options, the inability to use the flexibilities, the difficulties of combating unfair competitive practices and abuse of IP rights.

6.2.2. Status of the pharmaceutical sector in Mali

This development is characterized by four important periods.
Period 1960 - 1983:

The state has provided most of the functions of the pharmaceutical sector, namely: the importation and distribution through the People's Pharmacy Mali (PPM), a company of State, the importation and distribution to public health facilities through the supply of Pharmacy (Pharmappro) and 2 private pharmacies, creation of the Malian Office of Pharmacy (OMP) combining administrative functions of distribution, production and research, the strengths of this period are the existence of import and distribution, the care and medicines are free, and its weaknesses were lack of private sector, decline of resources for the purchase of medicines, mismanagement of state structures.
Period 1983 - 1989

The characteristics of this period can be summarized as the elimination of Pharmappro, the creation of the Malian plant pharmaceuticals, a monopoly of the MPC on the importation and distribution of drugs, the experience import essential drugs in DCI in the first development project to promote health cost recovery MOE and the viability of systems tested. There are other many important factors listed under: the development of real laboratory for experimenting with the distribution of drugs (Federations of habitations (FGR), Zones expansion and literacy CO rural areas, health stores in the regions of Timbuktu, Gao and Mopti, the privatization of health professions has resulted in the development of private pharmaceutical sector, the development and implementation of the reform pharmaceutical, remove the OMP.

Period 1989 to January 1994 considering that Mali  became member of WTO in  11th January 1993:

The fundamental characteristics of this period are: Putting into practice the concepts of the Bamako Initiative in the distribution of medicines and cost recovery, the lifting of the monopoly of popular pharmacy which resulted in the emergence of drug wholesalers of 4 private, the Health Project population and rural water supply among others contributing to the acceleration of the establishment of community deposits at health facilities, the establishment of new experiences drug distribution in Segou (Draft Segou SSP), in Sikasso (draft PSMs / PSF) and Koulikoro (PAPDK) and others, the signing of a contract between the state plan and the Popular Pharmacy of Mali, making it the preferred tool in the supply of essential drugs, the reorientation of different experiences drug distribution areas north (Gao, Timbuktu), remove the Inspectorate of Health.

Period from 12 January 1994 to present

To anticipate the effects of devaluation, the Department of Health has taken the following measures: Freezing of consumer prices from 13 to 31 January 1994, following negotiations between the various stakeholders in the field of medicine,
limiting the rising price of the drug through a consensual setting new margins which saw the government reduce the tax burden on medicines from 22% to 6%, wholesalers reduce their margin of 20% to 14% and pharmacists of pharmacies by 25% to 20%. These measures have helped to limit the increase to 55%, renewal of the policy of essential generic drugs at both the national level with the redefinition of a new political and subregional level marked by the return of Abidjan (March 1994) and the final communiqué of Brussels (April 1995), establishment of a distribution system called the master supply and distribution, mobilization by the MSPAS its development partners for assistance that enabled the acquisition of Meg, by an open international quality and competitive prices, agreement between distributors and private MSPAS on the establishment of maximum margins on medicines and distribution of essential medicines, fixing the maximum MSPAS margins in public and community training, development of the Code of Public Health.

6.2.3. The national drug policy

Mali, to achieve the goal of health for all, has established guidelines and clear strategies through a national policy based on the social cultural and economic goals of the country. In December 1990, Mali declared its sectoral health policy and population, based on the principles of IB (Bamako Initiative), the essential drugs occupied a central place.

Four major strategies were used in this sector policy and population health. This is the extension of health coverage and improving the quality, availability and accessibility of essential medicines, community participation in managing the system, mobilization of resources needed to finance the system health, including cost recovery.

Another major problem in the health sector of Mali is the counterfeiting medicines. Despite the efforts of governments, the phenomenon of drug known as "land" persists. A tour through the capital Bamako enough to realize the magnitude of this trend but it is an even more serious within the country where the majority of the population is illiterate. Yet the government has made great efforts to combat the scourge by substantially lowering drug prices and promoting essential medicines commonly called DCI (international name). In 2003, prices of DCI had been regulated in the public sector. Resulting in price reductions ranging from 3 to 64% depending on the product. On 25 January 2006, the Council of Ministers adopted a decree fixing the prices of essential medicines in the private sector. The decree sets the prices of 107 medicines. The result is an overall decrease of about 31.5% of prices in the private sector.

 In Mali, 90% of diseases are treatable with essential medicines, while the only difference between them and specialties is that the drug has fallen into the public domain. It is true that conventional medicine pharmacies remain relatively expensive despite government efforts.

From the above analysis, we can sum of situation of Mali pertaining to pharmaceutical patents as follows

a.      In Mali till date pharmaceutical patent is allowed although the country being a LDC is entitled to waiver of Pharmaceutical patents until January 1, 2016.

b.      The pharmaceutical sector in Mali was completely under the control of Government as a nationalised industry. But after becoming a member of WTO the Government tried to attract private investors in this sector. The aims of withdrawing government intervention were to improve the health and pharmaceutical sector and to ensure affordable medicine for its citizens.

c.      Even withdrawal of government monopoly on the pharmaceutical sector till date the progress of pharmaceutical sector in Mali is not satisfactory rather the price of medicine is increasing day by day.

d.      Traditional knowledge as means of treatment has great prospect in Mali, so government should take initiative so that it is not exploited unduly by any transnational pharmaceutical companies.

V

7. Towards a Balanced Legal Regime for the Pharmaceutical Patents

7.1. Options under the TRIPS Agreement: Flexibilities under TRIPS

It is anticipated that with the introduction of full product patent protection in pharmaceuticals before or after 1^st January, 2016, as the generic companies are to be prevented from introducing new drugs, the lack of competition will result in high prices. Supply of low cost new drugs to the local market and to other countries will be threatened.
However, TRIPS provides for some flexibilities to member countries of WTO to take action to tackle such negative consequences of product patent protection. We analyse here to what extent Bangladesh and Mali can utilise them for protecting public interest.
Within the scope of TRIPS, the following are the main flexibilities which developing countries can use:

7.1.1. Provide exemptions from grant of patents in certain cases:

Under Article 27(1) of TRIPS, patents will have to be provided for inventions, which are “new, involve an inventive step and are capable of industrial application” The agreement however does not define these terms. This provides some flexibility. It has been suggested that a developing country can interpret these terms so as to restrict the number of patents (Correa 2000; Abbott 2001; CIPR 2002).

Developed countries, for example, USA follow very liberal patent standards. Patents are granted not only for new chemical entities (NCEs) involved in the new drugs. Secondary patents can also be taken for new formulations, new combinations and new uses of existing NCEs. As a recent research report in USA has found, most of these new products provide no clinical benefits (NIHCM 2002). But these secondary patents can be taken later and since these would be valid even after the expiry of the patents on NCEs, the entry of generics can be delayed (Federal Trade Commission 2002). WHO (2001) in fact has warned that if the patentability standards are too broad, so that the terms “new”, “inventive” are defined to include all the new forms of the same NCE, then effectively the patent life can be extended beyond the 20-year period. WHO has advised governments to exercise discretion in this regard. CIPR (2002, p. 49) has pointed out that there is no compulsion under TRIPS for the developing countries to follow the liberal patent standards of developed countries. The aim should be to ensure that patents are granted for true technical contributions and not for blocking innovation and legitimate competition by generic producers (Correa 2000, p. 110).

Stricter patentability criteria are important not only to prevent the MNCs from “evergreening,” i.e., extending the life of patents. It can also prevent them from taking action to stop the generic companies from producing drugs covered by mailbox applications.

The Goverment of Mali and Bangladesh may take a restricting view of the definition of invention so as to prevent TNCs from broadening the scope and duration of their patent. Unfortunately till date the national laws of both country is very broad so as to allow MNCs overgreening practices.

7.1.2. Provide exceptions to product patent rights in certain cases

Patents basically confer on the patentee the right to prevent others from using the invention. But such rights are not absolute. All patent laws usually provide some qualifications to such exclusive rights. Article 30 of TRIPS permits member countries to “provide limited exceptions to the exclusive rights conferred by a patent …” This article does not list the specific acts for which exceptions can be provided. What it says is that such exceptions should satisfy certain conditions that it does not “unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties”. TRIPS does not contain any other explanation about the terms, “limited exceptions”, “unreasonably conflict”, “legitimate interests” and hence the use of this provision depends on the interpretation of these conditions. The following three are the most significant and common exceptions which the national laws in many countries provided when TRIPS came into effect:

a) Early working b) Parallel imports and c) Research and experimental use.

It is generally understood that individual countries have some flexibility in interpreting these terms and incorporating some exceptions to exclusive rights of the patentees in national patent laws. But under TRIPS , in the absence of clear guidance, any such use by a country  can be contested by any other country and in that case the former cannot use it unless the dispute is resolved in its favour.

a) Early working(bolar exceptions)

The “early working” provision is popularly referred to as the “Bolar” provision or exception, as it is known in USA. It is important to understand the background of the Bolar provision.

Under the Bolar provision of the Patent Act, non-patentees could start using the patented product for regulatory purposes even before the expiration of the patents.Moreover, generic applicants were no longer required to repeat the clinical studies to prove the efficacy and the safety of the product. They were permitted to rely on the innovator company’s safety and efficacy data and could file only anAbbreviated New Drug Application (ANDA). The generic applicants were required to demonstrate that the generic drug product has the same active ingredient, route of administration, dosage form and strength and is bioequivalent (the rate at which the drug becomes available for absorption in the patient) to the relevant brand-name product.

The Bolar provision is very important for generic entry. It permits generic entry soon after the patents expire and hence allows the consumers to benefit from competition and lower prices without delay. In the absence of it, generic companies will have to wait till the patents actually expire before they can start the tests necessary for getting regulatory approval. During the several months or even years it may take to get such approvals, the patentee will effectively enjoy monopoly status even though there are no legal barriers to entry.

The WTO dispute panel upheld the use of the Bolar exception as conforming with TRIPS in the Canada-EU dispute. Not surprisingly, after the very clear ruling in the EC-Canada case, ,most of the countries provides for Bolar exception.

Mali enjoys the benefits of Bolar exception under Article 8 of the Bangui Agreement of March 2, 1977 (Annex I), since September 1984, as last amended in February 1999 and adopted in 2002. Unfortunately in the Patents and Designs Act, 1911 of Bangladesh not provided any provision for early use like bolar exceptions. Therefore, the patent law of Bangladesh may be amended to incorporate this.

b) Parallel imports

Under Article 28 of TRIPS, the patent owner has the exclusive right to prevent others not only from making, using or selling the invented product or process in the country, but also importing from other countries. This is however subject to Article 6 on “exhaustion.” What it basically means is that the patent holder in a country cannot legally stop imports of patented products offered for sale in another country. Such imports of patented products without the consent of the patent holder in the importing country are known as parallel imports. This is very important in the pharmaceutical industry because the same patented medicine is often sold at different prices in different countries and hence parallel imports permit a country to shop around for the lowest price. The underlying justification of allowing parallel imports is that since the innovator has been rewarded through the first sale of the product, its patent rights have been “exhausted” and hence it should have no say over the subsequent re-sale. Under Article 6 of TRIPS as clarified by the Doha Declaration (paragraph 5(d)), each country is “free to establish its own regime for such exhaustion without challenge.”

The patent law of Mali and Bangladesh yet to introduce a parallel import provisions.

c)Research and experimental use

 As the Doha Declaration has affirmed, “the TRIPS Agreement shall be read in the light of the object and purpose of the Agreement as expressed, in particular, in its objectives and principles”. Utilising the above deceleration, the LDCs may provide exceptions for research and experimental use of patented medicines for the promotion of technological innovation and transfer and dissemination of technology. This is also important for maintaining and developing efficient alternatives to protect public health and to prevent patentees from abusing patent rights (Article 8 onPrinciples). R&D is a continuous process. If the indigenous sector is asked once in a while to develop a process, it is possible that they may not be able to do so. The opportunity of using the patented product for R&D purposes, will enable the indigenous firms to be ready with efficient processes and use these whenever they are permitted to do so. Article 66.2 obliges the developed countries to provide incentives to developing countries to promote technology transfer.

This provision may also be utilised by the Mali and Bangladesh and all other LDC’s.

7.1.3. Limit data protection

 To get marketing approval for a new drug developed, innovator companies are required to submit test and clinical data relating to safety and efficacy to national health authorities. The current practice is that when generic companies apply for approval of their drug, they are not required to conduct their own studies and submit independent data. They can rely on the safety and efficacy data submitted by the innovator company and get marketing approval for their products. But if the law of a country provides for data exclusivity, i.e., grants exclusive rights to the innovator company to prevent subsequent applicants from using the data submitted, then generic companies cannot use such data till the data exclusivity period ends.

Article 39.3 of TRIPS is being interpreted by the MNCs and some developed countries, particularly USA to mean that WTO member countries are required to grant data exclusivity for a specified period of time. But tracing the negotiating history and the text of Article 39, Watal (2001) and Correa (2002(a)) have concluded that the protection need not be in the form of data exclusivity. Watal 2001 (a) has pointed out that if that were the intention then the terms “exclusive rights” would have been used as in Article 70.9 (p. 204). Article 39.3 requires countries to protect data against “unfair commercial use.” And as Correa has argued, countries have the discretion to do so not through data exclusivity but by proscribing situations where a competitor obtains the results of testing data through fraud, breach of confidence or other “dishonest” practices and derive a commercial advantage.

Protection is not necessary if regulatory authorities do not require the submission of such data for marketing approval or if the data are already public. Protection is required only for new chemical entities. Countries have considerable discretion in defining what is “new,” and may exclude the different formulations based on the same chemicals. Thus even if test data are required to justify a new formulation, Article 39.3 does not require any protection of such data.

Thus if Mali and Bangladesh utilise the  above flexibility that would be useful to promote generic pharmaceutical industries.

7.1.4. Provide for government use

Article 31 of TRIPS dealing with compulsory licensing provides for special provisions “in the case of a national emergency or other circumstances of extreme urgency or in cases of public non-commercial use.”

Public use of patents or “government use” is a standard feature of patent laws in many countries. Under 28 USC Sec 1498 of the US patent law, the US government can use a patent or authorize third parties to use patents for virtually any public purpose. For any such use, the government is not required to negotiate with the patent owner. Nor is the latter provided any injunctive relief. All that it can expect is payment of compensation for the use.

The  government or anyone authorised by it may use (i.e., “make, use, exercise or vend”) an invention or acquire an invention for the purpose of the central government, state Governments or a government undertaking on payment of adequate remuneration or compensation. Except in circumstances of national emergencies, extreme urgency or public non-commercial use, the government need not even inform the patentee about such use. The patent owner, however can challenge such a use or the terms of such use. If the patented drugs are too expensive, then the government can produce or authorize others to produce and distribute these through public clinics.

In Bangladesh, considering the public interest Government may revoke any patent(under section 25 of the Act) . But this provision is not similar to TRIPS. Therefore, it may be challenged by any WTO member in future. That is why, the patent law of Bangladesh may follow the approach of US law. In Mali the provision of government use is not clear enough.

7.1.5. Provide compulsory licenses to non-patentees

TRIPS do not use the term “compulsory license.” Article 31 refers to “use without authorization of the right holder,” and includes both use by third parties (what is usually refereed to as compulsory licenses) and use by government.

Article 31 of TRIPS dealing with compulsory licensing, does not place any restriction on the grounds under which a compulsory licenses can be given. In case there were any doubt, the Doha Declaration has made it clear that “Each member has the right to grant compulsory license and the freedom to determine the grounds upon which such licenses are granted.”

The problem is that certain conditions listed in the Article will have to be satisfied. These include: (i) that authorization of such use will have to be considered on its individual merits, (ii) that before permitting such use (except in such cases as situations of national emergencies, extreme urgency, public non-commercial use), the proposed user will have to make efforts over a reasonable period of time to get a voluntary license on reasonable commercial terms, (iii) that the legal validity of the compulsory licensing decision and the remuneration will be subject to judicial or other independent review, (iv) the compulsory licenses can be terminated if and when the circumstances which led to it cease to exist and are unlikely to recur.

In fact as WHO and WTO  point out, compulsory licensing is one of the ways in which TRIPS attempts to strike a balance between promoting access to existing drugs and promoting R&D into new drugs.

In Bangladesh section 22 of the Act deals with the grant of compulsory licenses and revocation of patents. According to this section, any person can present a petition to the government of Bangladesh that the demand for a patented article is not being met. Under such circumstances, the government or the high court division may order the patentee to grant licenses on reasonable terms as they thinks fit. A revocation can also be made within grant of four years of the patent, in case the patentee fails to give adequate reasons for his default of non working or lack of adequate supply(Section 22 (4)).

Under the TRIPS Agreement, Mali allows use by third parties (compulsory licensing) or use public non-commercial (use by the government) without the permission of the patent owner. Agreement does not limit the grounds for these uses, but it contains a number of conditions must be met in order to protect the legitimate interests of the patentee.

7.2. Human Rights consistent legal regime for the Pharmaceuticals

Almost 2 billion people lack access to essential medicines. Improving access to existing medicines could save 10 millions lives each year, 4 millions of them in Africa and South-East Asia. Access to medicines is characterised by profound global inequity. 15% of the world’s population consumes over 90% of the world’s pharmaceuticals. The Millennium Development Goals(MDG), such as reducing child mortality, improving maternal health, and combating HIV/AIDS, malaria and other diseases, depend upon improving access to medicines. One of the Millennium Development Goal targets is to provide, in cooperation with pharmaceutical companies, access to affordable essential drugs in developing countries. The Constitution of the World Health Organisation (WHO) affirms that the highest attainable standard of health is a fundamental right of every human being. The Universal Declaration of Human Rights lays the foundations for the international framework for the right to the highest attainable standard of health. This human right is now codified in numerous national constitutions, as well as legally binding international human rights treaties, such as the International Covenant on Economic, Social and Cultural Rights and the Convention on the Rights of the Child.  Medical care and access to medicines are vital features of the right to the highest attainable standard of health. In 2000, the United Nations Committee on Economic, Social and Cultural Rights confirmed that the private business sector has responsibilities regarding the realisation of the right to the highest attainable standard of health. While this general statement of principle is important, it provides no practical guidance to pharmaceutical companies and others.  In below, we tried to provide some idea  for balancing pharmaceutical patents and right to health paradigm:

7.2.1. Duty of the sate

The state parties have a duty to respect, protect and ensure human rights. As right to health is a human right, therefore states are bound to ensure, protect and respect right to affordable medicines. Thus when patented medicines are out of reach of its citizens state must go for bargaining, negotiation and/or taking all the necessary steps to ensure right to health of its citizens. Over the years, the government of Brazil and south Africa negotiated and finally resort to compulsory license for ensuring affordable medicine for its citizens.  

7.2.2. Duty of the Global Actors (WTO, WIPO, UN, WHO etc)

World Intellectual Property Organisation(WIPO) and WORLD Health Organisation(WHO) both are specialised agency of the United Nations. Therefore both the organisation must work together to meet the human rights of all including right to health  which is one of the prime objectives of the United Nations. Keeping in mind this prime objectives and MDG, WIPO and WHO may go for negotiations with the WTO to make a framework to investigate the issues how intellectual property in general and pharmaceutical patent in particular may become human rights consistent in general and pro public health in particular. There may be a global agreement integrating all the major global players(WTO, WIPO, WHO), representative of pharmaceutical companies, stakeholders etc under the arrangement of United Nations for balancing between pharmaceutical patents and right to health.

7.2.3. Duty of the Pharmaceutical Companies

Although pharmaceutical companies are interested to invest for profitable medicines(which has great demand in the developed countries) and would like to charge as much as possible to recoup its investment and maximise profit, there must be some limit and alternative measures. In this case, there may be guidelines that all pharmaceutical company must invest 30%-40% of its total capital for neglected diseases. This may be ensured by a global agreement between the state parties of the United Nations. Again, there may be creation of global impact fund which will provide some compensation to any pharmaceutical company in proportion to its investment, R&D and contribution for neglected diseases in the developing and least developed countries.

7.2.4. Duty of the Civil Society groups

Civil society and Non Governmental organisation can play a major role to investigate the problems of public health  and related issues. In every country civil society group and NGO’s may be encouraged to make monthly or yearly studies on the impact of patent on the health sector of the country and may propose particular government to take proper measures to ensure public health and balancing between intellectual property and public health. They may also make study and database on the available traditional medicinal knowledge in the country and may encourage the people to use the same.

8. Concluding Remarks

Under TRIPS, it is mandatory for all member countries of WTO to provide patent protection for all products including pharmaceuticals. But the protection of the rights of the patentees is not the sole concern of TRIPS. TRIPS provides flexibility for governments to strike a balance between the private rights of patentees and the socio-economic needs and objectives of its people. The costs of high prices resulting from product patent protection can be tackled by:

(i) resorting to parallel imports or granting compulsory licenses during the patent term and

(ii) ensuring that the entry of generics is not delayed after the expiry of patents.

In a product patent regime, a proper compulsory licensing system is of vital importance in promoting competition while ensuring that patentees get compensation through royalties. In fact compulsory licensing is one of the ways in which TRIPS attempts to strike a balance between promoting access to existing drugs and promoting R&D into new drugs.

On the other hand, until January 1, 2016, all the LDC’s may suspend the protection of pharmaceutical patents and may take capacity building programs to encourage R&D and investment in the  pharmaceutical sectors and to promote its research institutions to come up with local solutions for common diseases in the country. Furthermore, WTO, WIPO, WHO may take measures to make the existing intellectual property mechanisms human rights consistent and development friendly not only for developed countries but also for least developed countries. Let us work together for a better world, where nobody will die simply for lack of medicine or high price of patented medicine.

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[1] For details on the TRIPS Agreement, visit www.wto.org

[2] Alan O. Sykes, TRIPS, Pharmaceuticals, Developing Countries, and the Doha“Solution”, 3 Chi. . Int’l L. 47, 57. According to Sykes, deadweight loss occurs when monopolists charge more for goods and services than the cost of producing them, thereby pricing consumers willing to pay that cost but less than the monopoly price out of the market. This loss of ‘consumer surplus’ represents the standard deadweight loss. In addition, with patents, monopoly rents may be dissipated by excessive investment in the race to develop new invention – a so called patent race. The extent of monopoly power in the form of patents proportionally decides the amount of deadweight losses.

[3] Edwin Mansfield, ‘Patents and Innovation: An Empirical Study’, 32 Management Science (1986) 175. According to another study pharmaceutical R&D expenditure in the UKwould be reduced by 64% in the absence of patent protection. C.T. Taylor and Z.A. Silberston, The Economic Impact, The Economic Impact of the Patent System (Cambridge, UK: Cambridge University Press 1973). Grabowski, supra note 51, 849, where he cites several such studies. Also see, Scherer, F.M. (2001) “The Patent System and Innovation in Pharmaceuticals”, Revue Internationale de Droit Economique, (Special Edition, “Pharmaceutical Patents, Innovations and Public Health”) 109-112

[4]Singham, supra note 60, at 375-79. Countries such as Japan and Canada that changed their laws in favour of strong intellectual property laws have experienced dramatic increase in R&D investment in their domestic pharmaceutical industry since making the change. Henry Grabowski, supra note 51, at 854-855.

[5]UNDP Human Development Report 2000 (Oxford University Press New York 2000) 84

[6] Report of the High Commissioner on Human Rights on ‘The impact of the Agreement on Trade-Related Aspects of Intellectual Property Rights on Human Rights.’ UN Doc No. E/CN.4/Sub.2/2001/13, 27 June 2001, paragraph 38. (Hereinafter Report of the High Commissioner)

[7]See for details, Azam, Mohammad Monirul, Intellectual Property, WTO and Bangladesh, New Warsi Book Corporation, 2008, Dhaka, Bangladesh..

[8] the Daily Star, 14/03/2008, dhaka, Bangladesh

[9] This section is based on Gehl Sampath, “Innovation and Health in Developing Countries: Can Bangladesh’s Pharmaceutical Sector Help Promote Access to Medicines?” A UNU-MERIT Study,  2007. This is a broader study on the pharmaceutical sector in Bangladesh, that looks at all other components in the domestic knowledge system (such as universities, public research institutes, hospitals and clinics), in addition to firms.

[10] Ibid

[11] Dr. Habibur Rahman, Director, Drugs Administration, 11 April 2007.

[12] Rapport de l’OMPI sur les brevets, statistiques sur l’activité-brevets dans le monde : Organisation Mondiale de la Propriété Intéllectuelle Édition 2007