In the U.S., it costs about $15,000 to $20,000 and can take up to three years to process a biotech patent application. The timeframe for the process in the BRIC (Brazil, Russia, India, China) nations is comparable to that, but the costs are generally a lot less, and those nations also are taking resolute measures to dispel any apprehension, as well as any external challenges—such as theft-by-illegal-generics and corruption—that foreign-based drug makers may perceive, or fear, to be an issue.
And it is not as risky an endeavor for international biopharmas to obtain and protect their patents in the BRIC nations as it once might have been, according to a consensus of intellectual property (IP) panelists at the recently convened BIO Convention in Boston, in a session, titled "Challenges & Opportunities of Protecting & Managing IP Assets in Emerging Markets."
In terms of growth, but not revenue, it is widely foreseen by many industry analysts and players that biotech drug markets in the BRIC nations will outpace the current reigning trio of the U.S., Europe and Japan, as early as within three years. And by 2050, the biopharma markets in the BRIC countries are poised to surpass those currently reigning combined markets in terms of revenue.
A significant amount of that growth is expected to come from an influx of biopharma companies looking to establish a local presence in the BRIC countries, where they not only will be seeking to capitalize on the R&D and manufacturing infrastructures but also filing patent applications to sell their drugs to the local populations.
Companies looking to conduct operations or develop and sell drugs in the BRIC nations should let go of any 20th century perceptions about unreliability that might dissuade their participation. Those days are gone, as these nations are being held to—and are adhering to—the same international standards as the market-leading nations such as the U.S.
Dong Kevin Liu, senior partner at Boss & Young in Beijing, advised those who are considering participation in the emerging markets not to believe the hype surrounding doing business in BRIC countries. They've worked hard to overcome old typecasting models.
Regarding concerns about corruption and circumventing legitimate processes, Liu said the rumors are not the reality.
China's IP: Squeaky Clean?
"China's patent office is likely the cleanest government office in China, because it actually enforces, and abides by the global requirements for the industry," Liu said. "Also, patent prosecution is done quite cost-effectively by traditional law firms for approximately $6,000 to $7,000."
And although China does not have a patent prosecution highway yet, it is still efficient and is the world's most dynamic patent office, according to Liu. It processes more than 1 billion applications annually to rank as the world's number one receiving office, which consists of some 7,000 employees and adds 1,000 to 2,000 more every year. It also prosecutes patents quickly—in about 2.5 years.
Undercutting Patents via Compulsory Licenses
One factor that does have potential to significantly impact corporate decisions on patent filings in the BRIC countries is the issue of compulsory licensing. Each of the BRIC nations has a compulsory licensing policy on the books, but so far the process has not been widely used, particularly in the biopharma field. Compulsory licensing permits a company to produce a patented product or process without the patent owner's consent. According to the World Trade Organization (WTO), it's a flexibility on patent protection included in the WTO's agreement on IP called the Trade-Related Aspects of Intellectual Property Rights.
But that hasn't curtailed industry concern that the legal procedure strips brand drugmakers of profits and is a policy that could be used to support domestic drug manufacturers at the expense of foreign companies.
India's recently granted compulsory license to generic drugmaker Natco Pharma to produce a generic of Nexavar (sorafenib, Onyx Pharmaceuticals Inc. and Bayer AG) has drawn a lot of industry attention for its perceived potential to jumpstart a salvo of such processes by BRIC nation governments or generics drug companies to undercut the patents of brand makers.
Bayer is appealing the ruling, and a hearing is scheduled for Aug. 21 in India.
The compulsory licensing topic was not a focal point of the panel discussion, but one of the speakers, Leonor Galvão de Botton, managing partner of patents at Murta Goyanes, an intellectual property law firm in Rio de Janeiro, Brazil, spoke to BioWorld Today on the subject. Brazil has a reputation and history of protecting the IP patents of foreign investors and has implemented one such license in the biopharma area.
She does not see the issue as one that should discourage foreign patent applicants, inasmuch as that policy has been rarely used in Brazil, and only then to address a problem that the government regarded as an issue that stood to pose implications of epidemic proportions on national and international health.
"In Brazil, compulsory licenses are considered only when the patent holder either practices with intent to abuse the granted rights; when the patent holder fails to exploit and utilize the patent in Brazil due to inadequate product manufacturing endeavors or a lack of complete use of a patented process, except when due to economic unviability; or when the level of commercialization otherwise fails to meet the needs of the market," she said.
She said the compulsory license can only be requested by a party that has legitimate interest and also has the technical and economic capacity to carry out the efficient exploitation of the subject matter of the patent, which should be destined predominantly for the domestic market.
"Despite being regulated in our law, Brazil has only seen one case of a compulsory license in the biopharma field, when in 2007 the Brazilian government granted a compulsory license for Efavirenz (storcrin), Merck's anti-HIV drug," she said.
Galvão de Botton said that license was requested based on the arguments that Merck & Co. Inc. was exercising the patent rights in an abusive manner. As a result, Brazil's president signed a compulsory license for Efavirenz to be purchased from generic suppliers in India. In doing so, the Brazilian government hoped to obtain reductions of up to $30 million annually in its anti-HIV program that provides HIV drugs for free to all HIV-positive patients.
She said Merck wasn't the only one to suffer from the Efavirenz situation, as Brazil paid a price for doing what it believed to be the right thing for the public good. And still, a look at the history of the implementation of compulsory licensing should show that the process is not being used arbitrarily for any national agenda purposes.
"At the time, the measure was controversial even within the government itself. While the measure did reduce direct health costs, it brought about other hidden costs that had not been anticipated, such as Merck's direct reduction in investment in Brazil and, most importantly, the negative impact that the measure had on general biopharma investment in the country," she said.
"In view of such important losses that Brazil was obliged to bear, it would be fair to say that compulsory licenses are currently a relative non-issue in Brazil that should not deter foreign or national patent applicants."
Brazil's compulsory license was legal under national and international trade law, but it was criticized intensely and publicly by Merck, as well as other brand drug makers, for the 60% price reduction it sought to get from Merck.
Countries Are Compelled to Act
There's no tangible evidence that emerging nations have implemented compulsory licensing for personal gain or as a government strong-arm tactic to undercut the patent rights of brand makers. Although Brazil appears to have weathered that storm to remain a prime destination for international biopharma business development deals and money, the issue still holds the potential to significantly influence executive decisions and affect market-bearing transactions pertaining to the BRIC nations, in which it seems all the major market players want to operate.
It is highly conceivable that no brand-drug company will ever be happy with what amounts to an early generic or biosimilar imposition that short-circuits the exclusivity and diminishes the revenue potential of its best-selling drugs in some of the world's most emerging and populous markets, such as Brazil and China. And it is likely they will cry foul each time the policy is put into practice, inasmuch as it does have a financial effect on their bottom lines.
Conversely, countries such as Brazil and India, with high, or increasing, numbers of disease in indications such as HIV/AIDS and diabetes, contend they are compelled to act to prevent or curtail proliferating disease conditions or epidemics by whatever practical means are available.
It likely will take more than compulsory licensing to derail the biopharma/BRIC relationship. There is a reason drug makers continue to deal with the BRIC nations, despite the concerns related to the compulsory licensing issue or some of the preconceived perceptions associated with the BRICs that may have been carried over from their days as communist, undeveloped or imprecisely regulated market nations.
Those emerging economies have increasing-to-burgeoning disease incidence growth rates that parallel their population growth, and their attractive business development competencies and infrastructures can still save drug makers a substantial amount of money. They are simply too big to ignore, given their current growth market statuses and the icing-on-top projections for the BRICs to become the leading biopharma market nations.
BRIC nations now account for 40% of the global population and 40% of global GDP, while together, the BRICs could be larger than the U.S. and the developed economies of Europe within 40 years, according to data compiled by Global Sherpa, a nonprofit organization that tracks globalization trends in various markets.
And those emerging economies are projected to account for more than 25% of the global biologics drug market revenues by 2015, according to data released in a June 2012 report from GBI Research, a business intelligence research publisher.