(Paper presented to Workshop ID, Cartagena, March 1996)

By: Harvey E. Bale, Jr., Ph.D., Senior Vice President International
Pharmaceutical Research and Manufacturers of America

"Without the sense of security which property gives, the land would still be uncultivated. "
François Quesnay (1694-1774), Maximes Générales (1760)

In this forum on policies affecting development and technology, I highlight the importance of the role of providing strong protection of intellectual property rights. In a study published in 1995 by the World Bank-affiliate — the International Finance Corporation (IFC) — it was concluded that "a country’s system of intellectual property protection seems to have a substantial effect in relatively high technology industries like chemicals, pharmaceuticals, machinery and electrical equipment on the kinds of technology transferred to that country and the amount of direct investment in that country … by Japanese and German, as well as U.S., firms."

If we consider this fact in light of the global competitive position of the Americas in relation to that other great region where economic development is accelerating –Asia– I am afraid we have to be quite concerned. With the exception of India, all major developing countries in Asia have adopted much stronger industrial property protection — covering patents, trademarks, etc.– than is the case in many countries of the Americas. The effect on investment and technology has been dramatic. Having been in China recently, I have seen the investment enthusiasm that has led to 12 joint-ventures between American and Chinese firms in the pharmaceutical sector following passage of China’s 1992 patent legislation. As the head of China’s Patent and Trademark Law Office said last week, "New technology is the most important thing brought in by external investment and patents are a way to protect that technology." Unfortunately, in our own hemisphere, there are still forces fighting rearguard actions to protect their privileged position by preventing early action on patent legislation.

On a global plane, there is very little debate today about whether there should be strong intellectual property protection for pharmaceutical products. Debates of the past about the so-called "monopoly" effects of patents on the market place have been resolved in favor of the recognition that adequate patent, trademark, and trade secret protection for pharmaceutical products is absolutely essential for the development of new pharmaceutical compounds. In other words, without adequate intellectual property protection, we would not see the new miracle drugs for mental depression, heart disease, etc. that have benefited patients in recent years. New pharmaceuticals that result from strong patent protection are saving lives, money and improving the quality of life of patients around-the-world.

A decade ago, Professor Edwin Mansfield of the University of Pennsylvania described in a simple table (Table 1) how pharmaceutical innovation and development were dependent, in absolute terms and relative to other industries , on strong patent protection. This ranking is not very surprising when you consider that the ratio of R&D expenditures of the pharmaceutical/biotechnology industry is far higher than in any other important industrial sector (PhRMA companies spend 20 percent of their revenues on R&D, compared to less than 4 percent for U.S. industry overall). It costs hundreds of millions of dollars in the United States to do R&D for each new marketed drug discovery; and it takes an average of a decade or more to bring each new pharmaceutical compound to the marketplace.

If it has been conceded that patent protection is essential for pharmaceutical products, it has been argued by some that such protection should be: 1) very limited compared to other sectors, perhaps subject to compulsory licensing; and 2) restricted only to advanced industrial countries. These arguments, too, have lost out to the recognition that the term of patent protection (because of regulatory delays) needs to be lengthened beyond the normal standard for other products; that compulsory licensing provisions such as previously existed in Canada, need to be repealed; and that, in fact, developing countries themselves have much to gain in providing pharmaceutical patent protection.

Looking over the past twelve years, in the United States, Europe and Japan the term of patent protection for pharmaceuticals has been uniquely extended to make up for some of the economic benefits lost during the life of a patent in the process of obtaining necessary regulatory approvals (e.g., from the FDA) for marketing pharmaceutical products.

Canada and New Zealand, several years ago, repealed onerous compulsory license measures that eroded the effect of intellectual property protection; and since 1986 developing countries of Asia and the Western Hemisphere have adopted strong intellectual property protection for pharmaceutical products as Table 2 shows. The fact is that, today, there is only a small minority of important developing countries that still do not provide adequate intellectual property protection for pharmaceutical products. A number of those countries unfortunately are in Latin America. But even this is changing. Aside from the fact that the U.S. Government has made strengthened intellectual property protection abroad a major priority in its negotiations with foreign governments, there are other — even more compelling — reasons for developing countries in the Western Hemisphere and elsewhere to change their current or past anti-patent policies.

Increasingly, it has been recognized that the non-patentability of pharmaceutical products is a growing economic and health burden on the economies of Latin America — leaving aside the fact that it sours the trade relationships between Latin America and the United States, and increasingly Europe and Japan. Inadequate intellectual property protection is disguised protectionism for local industry. A 1990 study by the Latin American Economics Foundation FIEL states that: "the non-patentability of pharmaceutical products, that was in its beginning a device designed to safeguard public health, has presently turned into an instrument used to protect local industry." It has also become another basis for the corruption of public officials. Further, in this age of emerging and re-emerging serious infectious diseases, particularly in tropical climates, the lack of intellectual property protection for pharmaceuticals is an example of national and regional disarmament against the invasion and destruction of such diseases. Without patents, where is the incentive for local companies and research institutions to exploit the biomedical promises of Latin America’s rain forests? Why must Latin American scientists go to the United States or Europe to win Nobel prizes for the discovery of new pharmaceutical compounds? These are issues and questions which every government in the hemisphere is asking as they review their intellectual property policies.

Read the rest of this report on pharma patent protection.