Member Article

As the overall level of convergence between industries in the business world keeps increasing, it is only logical for the related legal aspects to follow suit every step of the way. Nonetheless, even though this is becoming something of a regular occurrence nowadays, there are particular legal practice areas that have been tied to their industry counterparts for quite a long time now, and perhaps none so much as the relationship between the pharmaceutical industry and intellectual property (IP) rights.

Often called the "pharmaceutical company's most valuable resource", IP protection is of vital importance to the functioning of such companies for a variety of reasons, many of which – contrary to popular belief – are not deriving from selfish profit-making intentions. In order to understand these reasons, one should take into consideration the highly challenging business model under which pharmaceutical companies operate. More precisely, if we were to look at the process of medicine development, official data shows that out of 5 000 – 10 000 experimental compounds (which are often researched and developed for close to 10 years while costing in the range of EUR 1-2 billion), only 1 ends up as approved by the governing body. Moreover, having in mind that only 2 out of every 10 medicines produced can recoup the costs of development, it becomes clear how important it is for pharmaceutical companies to capitalise on the few successes they find. This is where it comes down to IP protections to make this possible, since through the process of registering patents they provide resources for research and development, encouraging further innovation as a consequence. Therefore, it may be fair to assume that creating, obtaining, protecting, and managing IP should become a corporate activity similar to the way resources and funds have been raised, so that – among other things – conditions are created for the continued evolution of knowledge.

However, seeing as how pharmaceuticals present a constituting element of globalisation – they are equally essential everywhere to everyone – it comes as no surprise that a number of accompanying issues arise concerning IP protection in a broader context. A premier example in this regard being the discrepancy between the major economies of the world and the developing, emerging countries and markets. Whereas in the first and second world countries it is possible for companies to enforce their IP rights through regulations and agreements with relevant entities, emerging markets (especially those large scale ones such as China and India) – have networks of countless local manufacturers who produce cheap counterfeit versions of patented drugs – some of which even find their way back into the western countries. This has put multinational pharmaceutical companies in a rather difficult position, as they now need to account for the balance between aiming for innovation and progress by invoking their IP rights on one hand, and formulating a way to provide affordable drugs for the developing world on the other.

Finally, an illustrative, recent example in this regard, can be found inGlaxoSmithKline's (GSK) decision to not invoke their IP rights on medicines in low-income countries and thus widen access to its products by allowing generic manufacturers to produce low-cost copies of GSK drugs with no risk of legal challenge. Such an approach on behalf of GSK should, however, be put in perspective by calling upon therecent Decisionbrought forth by theWorld Trade Organisation(WTO) that has extended the drug patent exemption for all of the least-developed-countries (LDC) of the WTO until 2033. Considering the fact that many countries from the LDC group are the same countries in which GSK has decided to rescind their IP rights, it becomes clear that their decision is somewhat less revolutionary than it might seem at first, albeit still valid in terms of what the accompanying publicity might accomplish for the treatment of the entire issue going forward.