Intellectual Property Rights (IPR) is a legal right conferred to the inventors/creators of an intellectual work, which prevents others from using the work in an unauthorized manner. Today, economists view IPR as a policy tool for encouraging innovation, but on the contrary they recognize the fact that IPR can inhibit competition too. For example, patent rights for pharmaceutical products result in reduced competition and high prices. Providing exclusive rights for medicines often clash with other important natural rights, such as, right to life and access to life-saving medication. Poor country consumers and governments criticize patents for pharmaceutical products on the grounds that such patents will result in reduced competition and high prices for pharmaceutical items. A patent-holders right to enjoy monopolistic control over the sale of its drugs always allows him greater scope to set up uncompetitive and unconscionable price.
It may be pertinent to mention that, patent is an exclusive right granted to inventors for a limited period of time by the state. Patent protection is given to reward the inventor for his time and effort, which is given for a certain period of time, e.g. 20 years under the TRIPS agreement, while the Patent Act of Bangladesh gives it for 16 years only. In order to enjoy patent right, an inventor must apply for patent registration and we may keep in mind that IPR are subject to territoriality. Department of Patent, Design and Trademarks (DPDT) under the Ministry of Industries, deals with the issues related to patents, trademarks, geographical indications and industrial designs.
Patent protection makes necessary medicines expensive and less accessible to patients mostly in poor countries. Currently 10 million people die each year, which can be attributed to the lack of access to life-saving drugs. Part of this situation is caused due to the TRIPS (Trade Related Aspect of Intellectual Property Rights) Agreement. TRIPS is the international agreement that sets out the standard of requiring all member states to create strict IPR system within their respective jurisdiction. Developing countries are however concerned that enforcement of TRIPS would undermine access to medicine for the poor citizens. Keeping this in view developing countries were allowed flexibility and transition period to implement the TRIPS obligations to their national laws. For pharmaceutical patents the transition period was drawn-out until January 01, 2016, which has fairly recently been extended for a further term until January 01, 2021. In addition of enjoying the transition period the member states may as well grant compulsory licenses, under certain grounds, to allow production of patented medicines at a lower cost.
Among the LDCs, Bangladesh is the only country, which has a very strong pharmaceutical manufacturing backbone. There are currently 194 ‘functional’ pharmaceutical companies in Bangladesh, which include MNCs too. The top 10 companies (all locally owned) have 67.6% market share while the top MNCs hold only 9.1% of the market share. During the last five years, the domestic pharmaceutical market has experienced robust growth and has almost doubled in value to more than US$1 billion. This is due to the growth of the domestic market, rise in healthcare spending and the increase of new types of diseases.
Table 1. GDP and Health Care Expenditure in Bangladesh, 2005-10
(World Bank World Development Indicators, in Bangladesh DTIS, 2013)
As an LDC, Bangladesh is legally allowed to do reverse engineering, manufacture and sell generic versions of patented medicines for domestic consumption as well as for export to other LDCs until the end of 2015. Bangladesh usually exports common brands of medicines including specialized products like inhalers, suppositories, nasal sprays, injectable and infusion to 80 countries across the world. However, a dearth of basic raw materials i.e. Active Pharmaceutical Ingredients (API), holds back the potential of the industry. Of the 194 functional drug makers in Bangladesh, only a few companies produce API on a limited scale. Bangladesh has to import 95% of the required API from overseas. A few companies such as Active Fine Chemicals, Square Pharma, Beximco and Ganoshastha produce the remaining 5%. Incepta, Renata and Orion are considering starting API manufacturing soon. The reality of API production capacity in Bangladesh indicates that the sector has the potential to be promoted as a thrust sector. In 2011, local manufacturers met 97% of domestic demands. Only 3% of the specialized products, i.e. vaccines, anti-cancer drugs, hormones and insulin are imported.
To make most out of the benefits of the extension of TRIPS in granting patents for pharmaceutical products, the Department of Patents, Design and Trademarks has suspended granting of patents for pharmaceuticals owned by foreign entities from January 2008 until 2016. A section of the pharmaceutical industry predicted that Bangladesh would benefit immensely from the patent exemption due to its ability to produce patented medicines and export those under the exemption. It was thought that the patented medicine business would be diverted from India to Bangladesh when India would not be legally allowed to produce patented medicines after patenting became mandatory in India from January 2005, while Bangladesh would continue to have the exemption granted to LDCs. But discussions with insiders in the pharmaceutical industry suggests that such contemplation did not take place due to India’s effort to amend the Patent Act, 1970 (amended by the Patents (Amendment) Act, 2005), through which, India successfully prevented pharmaceutical companies from ever-greening their patents by incremental innovation/re-combination of known substances. Therefore Indian generic medicine manufacturers could still produce medicines whose patent life could not be enhanced and thus was successful in keeping the business within India. In addition, the molecules that enjoyed patent protection until December 31, 2004 were declared Off-patent by India.
Nevertheless, experts think that more investment and skills are required in order to increase the production capacity of basic raw materials of drugs, i.e. APIs. Other infrastructures like API Parks are a vital factor too. The under construction API Park in Munshigonj, once completed, will help pharmaceutical companies to manufacture APIs at a very competitive cost. Streams of skilled labor in chemistry and engineering are a further requirement. Flexibility within the foreign exchange regulations is also very important to help the industry to pay for receiving certification from regulatory authorities of other countries, hiring consulting services to help with the best practiced manufacturing tools and know-hows, etc., since strict foreign exchange controls deter local companies ability to undertake critical activities abroad which is vital for increasing exports.
In addition, establishment of a WHO-accredited bio-equivalence clinical test laboratory must be considered. Accreditation by the USA and UK regulatory authority would make it more demanding so far acceptability of the test reports in regulated markets are concerned. The bio-equivalence test must also come at a reasonable cost, additional investment and developing the capacity to produce quality medicines in order to meet the regulatory requirements of the developed markets are imperative. Development of accredited laboratories, however, would help achieve it.
Dr. Mohammad Abu Yusuf is a member of BCS (Customs and Excise) Association. He is currently working as a Senior Fellow, Bangladesh Foreign Trade Institute (BFTI), Dhaka. He is also a part time faculty at the AIUB University, Banani Dhaka. The views and comments expressed in this paper are his own, and do not in any ways reflect the views of the Government of Bangladesh or the organization he works for.
Md. Sarwar Hossain is the Joint Director of Bangladesh Bank, Head office, Dhaka. The views and comments expressed in this paper are his own, and do not in any ways reflect the views of the Bangladesh Bank.
The story was first published in INTELLECT Issue no.3, dated November 2013.