24 - 30 May 2001
Issue No.535
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Al-Ahram Weekly Online 24 - 30 May 2001 Issue No.535 |
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Awaiting the crunch
Egyptian pharmaceutical companies are holding their breath as the deadline for the full implementation of TRIPS nears. Rana Allam investigates how the agreement witll impact the medicine market
Now that the Trade-Related Aspects of Intellectual Property Rights (TRIPs) agreement is coming into effect for Egypt, with the 10-year transition period granted to developing countries coming to an end, concerns are mounting regarding how this will affect the availability of drugs and their prices in the next few years. To comply with TRIPs, Egypt must undertake extensive reform of its patent laws to protect pharmaceutical products.
The TRIPs agreement states that "Patents should be available for any invention, whether product (such as a medicine) or process (such as a method of producing the chemical ingredients for a medicine)."
For an invention to qualify for a patent, it must be characterised by "novelty," it must be an "inventive step" and it should have "industrial applications." The main impact of introducing patent protection for pharmaceutical products is that all production based on imitation of patented products will have to cease or be carried out under licensing agreements.
It is predicted that in the short term, the impact will be negative; prices will rise and only patent owners will benefit. "Another major problem is the availability of medicines," says Dr Abdel-Aziz Saleh, assistant regional director and drug specialist for the World Health Organisation in Egypt. Saleh notes that there has been no substantial research done to estimate how much the prices for pharmaceuticals will rise in Egypt.
According to a study by the Egyptian Centre for Economic Studies (ECES), the local pharmaceuticals industry is not geared to manufacturing the active ingredients of drugs, but "it has matured enough to be able to produce generics without direct involvement of foreign producers by importing the active ingredient." However, Saleh suggests this analysis is overly optimistic. "Since raw materials are also patented, then generic drugs are also out of reach," he says.
Under TRIPs, patent protection lasts at least 20 years from the date the application is filed. With the protection of patents, imitation will cease, meaning that local firms' share of total domestic sales will fall, while that of foreign firms based in Egypt, alongside imports, will increase. "International firms will stay in Egypt and giant mergers are already in progress," says Dr Galal Ghorab, chairman of the Holding Company for the Manufacturing of Drugs. The new entities embracing the merged companies, as Ghorab explains, will themselves enter the field of generic drugs. They are also expected to import drugs as well as produce ones for which they hold the patent. And as long as those firms are manufacturing drugs in Egypt or importing them, it is highly unlikely that they will grant licences to local firms. "This means that we will face very tough competition," says Ghorab, adding that the pace of innovation and obsolescence of drugs increases this trend.
There are, however, some articles in the TRIPs agreement that show a little light at the end of the tunnel, namely, those for parallel imports and compulsory licensing. Under the article for parallel, or "gray" imports, a country or a company has the right to import a patented product or sell a drug bought from a country or company licensed to produce it. "For example, if India bought a certain licence and wants to sell it to Egypt at a lower price, Egypt is allowed to buy it," explains Ghorab. The legal principle here is "exhaustion," the idea that once the patented product is sold, its holder no longer has any rights over the product.
Compulsory licensing and government use of a patent without the authorisation of its owner can only be done under specific conditions. A voluntary licence should be applied for first and if the patent owner demands unreasonable commercial terms, a compulsory licence may be issued along with payment to be made to the patent holder. However, for "national emergencies," "other circumstances of extreme urgency" or "public non-commercial use" (government use), there is no need to apply for a voluntary licence.
Currently, research and development is very limited especially among local firms, and according to the ECES study, the development of one new patentable drug today costs between $250-400 million -- almost half the annual revenue generated by the entire Egyptian pharmaceuticals industry. "We have individual initiatives," says WHO's Saleh. He adds that although there is the potential for pharmaceutical innovation in Egypt, "we never reach the final stages." What is lacking in Egypt, he says, are systems and funding for research and development. "Funds can come from many sources," says Ghorab.
One approach to effectively harness available funds would be to form internal and external alliances among companies under which both costs and profits are shared. There are also government subsidies that can be used to support research. "We are taking counter-measures to face the negative impact of TRIPs on the Egyptian pharmaceuticals industry," Ghorab confirms.
The Arab Pharmacists Union held a conference in Algeria last month which issued fairly theoretical recommendations in this regard. The union called for coordination between public and private Arab pharmaceutical companies, the establishment of an Arab research centre capable of developing new drugs and ingredients, as well as issuing a set of guidelines for producing and trading pharmaceuticals in the Arab world. "We are doing what we can," says Dr Ali Ibrahim, secretary-general of the union, "we are trying to come up with solutions and recommendations that might help those in charge of the industry develop some guidelines."
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