This document discusses using patent information to track the globalization of innovation in the biopharmaceutical industry. It examines how location affects R&D and production decisions and outlines three models countries use: weak intellectual property laws to focus on generic production (India, Brazil, Thailand), moderate intellectual property to leverage generic skills and develop innovative drugs (Israel, Cuba), and strong intellectual property to attract manufacturing investments (Singapore, Puerto Rico). Analysis of patent data shows while the US remains the top location for pharmaceutical innovation, Asia is rising and the EU is stable as the US is slipping as the sole global leader.

1. Using patent information to track globalization ACS CHAL March 28th 2011 Yali Friedman, Ph.D. – info@thinkbiotech.com

2. Using patent information to track globalization Why it matters: Challenges of not having domestic drug R&D How to measure it: Using patents to track globalization of innovation

3. 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?

5. Gain foreign currency

7. Non profit-enabling diseases are unlikely to attract investmentFollowers Importers Exporters

8. 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?

9. 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

10. 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 Global Biotechnology

11. 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 Global Biotechnology

12. 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. Global Biotechnology

13. 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? Global Biotechnology

14. Overcoming weak/poor markets Global Biotechnology 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

15. Meeting national needs: Economic Development Global Biotechnology 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

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

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

18. Assigned relative inventorship based on inventor locations

19. US is slipping, EU stable, Asia rising

20. But, which are the leading countries?

21. And… what about individual US states?

22. Questions? Yali Friedman, Ph.D. info@thinkbiotech.com www.DrugPatentWatch.com www.CommercialBiotechnology.com