Pharmaceutical globalization: Where are drugs invented?

Globalization of Drug Discovery
Drug Discovery Partnerships: Filling the Pipeline
October 17th 2011
Yali Friedman, Ph.D. – editor@CommercialBiotechnology.com

Globalization of Drug Discovery
Why it matters:
- Challenges of not having domestic drug R&D
How to measure it:
- Using patents to track globalization of innovation

Global Biopharma Overview
Location matters
Workforce cost, availability
Access to skilled management, supportive services
Proximity to innovative science and markets
Who is doing what, where?

Technology producers vs. consumers
Drugs tailored to domestic healthcare needs
Gain foreign currency
Tax revenues from domestic companies and workers
Innovators
Reliant on others to develop drugs for domestic needs
Non profit-enabling diseases are unlikely to attract investment
Followers
Importers
Exporters

Strong market opportunities drive innovation
Why is the U.S. the world leader in biotechnology?
World’s largest prescription drug market
Not divided like European countries
World’s strongest patent protection
World’s largest absolute expenditures on R&D
The U.S. once spent more on R&D than the rest of the world combined
No government price controls
But, who is inventing the next generation of drugs?

What happens when you don’t develop drugs?
Case Study: Philippines
Limited domestic drug production capacity
Must purchase essential medicines from foreign countries with higher wage-costs (e.g. Singapore)
This is effectively reverse-offshoring
Government has a limited budget, must make difficult decisions about how much of which vaccines to buy
Domestic production would reduce costs, preserve foreign currency, keep revenues domestic, and could train workers for innovative drug development

Acquiring Medicines
Develop a domestic drug development industry
Pros: Can develop drugs for domestic needs, can drive tax revenues, can derive foreign currency from exports
Cons: Expensive, takes time, requires unwavering government support
Buy drugs from foreign countries:
Pros: No need to invest in risky R&D, gain access to best drugs produced by global leaders
Cons: Expensive, depletes foreign currency, doesn’t generate tax revenues

Solution: Produce foreign drugs locally
Weak patent laws enable domestic production of drugs developed elsewhere
Pros: Low-cost domestic production of many drugs using domestic workers, tax revenues from production and sales
Cons: Reduced foreign investment by global firms, reduced motivation to develop drugs for locally-endemic conditions

Costs of Weak Patent Protection
India (mostly) adopts TRIPS accords in 1995
Amends patent laws to protect product patents, with the notable extra criteria that new drug products must “differ significantly in properties with regard to efficacy”
In 2007 Novartis failed to obtain a patent on Glivec (sold as Gleevec in the US)
Novartis CEO: unfavorable patent ruling is “not an invitation to invest in Indian research and development.” Company will redirect hundreds of millions of dollars in investments to countries where it has greater IP protection.

Who benefits from not patenting Glivec?
Novartis provides Glivec free to most patients in India
Because Indian manufacturers would be unable to compete with Novartis’ free domestic distribution, their target markets would likely be in other countries, where they could potentially erode Novartis’ market.
Is India forfeiting investments from Novartis simply so that Indian companies can sell Novartis’ drugs abroad? Does this serve the public?

Mexico accepts Amgen drug
Long-standing law:
International drugmakers must conduct at least some of their manufacturing in Mexico
Pros: Training of Mexican workers
Installation of domestic biotechnology infrastructure
Facilitates growth of domestic biotechnology industry
Cons: Some companies may decide not to sell drugs in
Mexico, depriving the country of valuable medicines
Amgen insists that they only want to have onemanufacturing facility, in California
Mexico amends rule
Defines a list of drugs (e.g. anti-HIV, vaccines, hormones) able to be imported without Mexican manufacturing facilities

Overcoming weak/poor markets
Mectizan
River blindness drug developed by Merck
Affected individuals unable to pay for drug, so Merck distributes the drug for free
This model is unsustainable. Doesn’t incentivize development of drugs for these conditions, instead relying on companies to support tangential discoveries.
OneWorld Health, Bill & Melinda Gates Foundation, etc.
Non-profit drug company solicits foundation support to actively develop shelved drugs for neglected populations

Meeting national needs: Economic Development
Three basic models
India, Brazil, Thailand
Weak IP, focus on generic production and foreign sales
Israel, Cuba, maybe India
Moderate IP, leverage generic production skills to develop innovative drugs
Singapore, Puerto Rico
Strong IP, attract manufacturing investments from global leaders

Where are drugs invented?
Friedman, Y. (2010) “Location of pharmaceutical innovation: 2000–2009” Nature Reviews Drug Discovery 9:835-836

Indexed patents covering FDA-approved drugs
Source: DrugPatentWatch.com

Assigned relative inventorship based on inventor locations

US is slipping, EU stable, Asia rising

But, which are the leading countries?

And… what about individual US states?

Questions?
Yali Friedman, Ph.D.
editor@CommercialBiotechnology.com
www.DrugPatentWatch.com
http://www.BiotechBlog.com
www.CommercialBiotechnology.com
www.Logos-Press.com

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