Total pharmaceutical sales in BRIC nations (Brazil, Russia, India and China) are expected to experience almost double digit growth per year from 2016 to 2020, according to a recent report by Frost & Sullivan.
During this four year span, BRIC nations, as well as Mexico and Turkey, will account for nearly $100bn in sales growth – and an estimated 40% of this will come from innovative drugs.
Currently, pharmaceutical sales in China are the third highest in the world, with an increase in resident applications accounting for the majority of the growth. Patent filings in Brazil and India are dominated by big pharma companies.
Manmohan Singh, Senior Consultant, Frost & Sullivan, tells us, that for these reasons, “IP protection in each of the target markets and its enforcement will be critical in order to achieve long-term growth.”
The precedents and risks
While there are opportunities in emerging markets, there are also risks.
One such example is compulsory licensing (CL), in which the government gives permission to produce a patented product without the consent of the patent owner. Brazil, Ecuador, and Taiwan have all awarded CL in the recent past.
Specifically, India awarded CL to Natco for Nexavar, a Bayer Healthcare patented product.
Singh explains that this “sets another precedent for emerging economies which are deliberating to amend their patent laws on CL for providing more affordable drugs to their citizen.”
“More such developments in emerging economies will pose a risk to big pharma companies,” he adds.
In the Bayer-Natco case, Bayer had been importing Nexavar rather than producing the drug, which the verdict took into consideration.
“Therefore, in future, whether the patent was being worked in its jurisdiction or not, will be key consideration for compulsory licensing,” explains Singh. “This will be a big challenge for pharma companies, which were relying on imports so far.”
Additionally, patent approval length is always a concern, both in the US and elsewhere. Yet, with a huge backlog of patent applications at the Brazilian Patent Office (INPI) the approval process could take 8 to 10 years, which could slow the pace of patent grants in the country.
The utter volume of resident applications at the Chinese patent office (SIPO) also poses concern.
“Further review of patenting activity at SIPO shows those utility models make significant proportion of these resident fillings because they do not undergo substantive examinations before being granted, and cost less,” explains Singh.
This high percentage of resident fillings dominated by utility models is raising doubts about the quality of patents emerging from the country.
IP policy developments and impacts
In a now infamous case, Novartis filed a patent application for beta-crystalline form of imatinib mesylate (brand name Gleevec) in India several years ago; however the patent was rejected on several grounds.
Specifically Section 3(d), The Patents Act, 1970. Section 3(d) of the Indian Patent Act, “which expresses that minor changes to existing molecules will not be deemed as sufficient for further patent protection, was critical to this case,” explains Singh.
Novartis challenged the decision and appealed in various courts (for seven years), yet the original dismissal was upheld.
According to Singh, the patent application rejection is important because it “throws a big question on the issue of evergreening practices, adopted by pharma companies by setting up higher threshold for inventiveness patentability criteria.”
The court’s decision serves as important precedent for other developing countries, such as Argentina and Philippines, which have since adopted a similar law.
Additionally, big pharma has been raising serious concerns about the adverse impact of India’s decision to award CL to Natco for Nexavar on innovating drug companies.
“As more emerging economies are deliberating to amend their patent laws on CL, big pharma should rethink about existing business models,” says Singh.
While China has already made these amendments Brazil is still considering a similar initiative.
“Therefore, in future, whether or not the patent was being worked in Indian territory will be key consideration for compulsory licensing,” adds Singh. “This will be a big challenge for pharma companies, which were relying on imports so far.”