Why is the biopharmaceutical industry so reliant on patents?
The biopharmaceutical industry and the products it produces are key components in a market worth more than $1057 billion. Pharma has tried to implement a strong intellectual property (IP) management system to protect the low-cost reproduction of clinical research that undermines the work of IP owners and the substantial contributions of investors. Competition in the global pharmaceutical industry is driven by scientific knowledge rather than manufacturing know-how and products can quickly be reproduced at a fraction of the cost, with copycats avoiding expensive and lengthy research phases. Each industry needs to evolve individual IP policies, management style and strategies depending on its area of specialty. For the pharmaceutical industry, patents are a critical form of IP management and protection.
Patenting systems operate in different ways across industries. In the electronics sector patents are often shared by competitors through cross licensing. Any given product is expected to contain many patented technologies but shared licensing accommodates innovation while safeguarding IP ownership. However, in biopharmaceutical industries a patent will equal the product – protecting the extensive investment in research and clinical testing that must be actioned before a new product enters the market. The pharma industry is under continued threat from Intellectual Property (IP) theft and copycats that can replicate the manufacturing process of a new drug– which is often easy – at a fraction of the cost used by pharma companies. Capital invested in the pharmaceutical industry is largely directed to clinical research and trials, rather than the manufacture of the final product. The implementation of exclusive patents is the only way to effectively protect and receive a return on this investment.
The production of pharmaceutical products needs substantial funding and its high cost effectively dismisses the opportunity for product innovation in underdeveloped countries. For example, the biopharmaceutical industry in the United States is thriving – a combination of strong patent protection and access to a market that is free of price controls. The United States is the world's largest market for pharmaceuticals and world leader in biopharmaceutical research, holding the IP rights for most new medicines.
Until the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement in 1994, developing countries provided no patent protection for biopharmaceutical and pharmaceutical products. While the countries that have joined the World Trade Organisation (WTO) have committed to providing stronger patent protection, less developed countries were not required to meet this obligation until 2016.
Medical research in these nations is forced to take place in the public arena. The weak patent protection available for these pharmaceutical products makes research-based industries impossible to modernise in developing countries. The lack of patenting available for inventions developed in the public sector, and the related lack of experience in licensing them to the private sector, quashes the development of commercial enterprises focused on alleviating the burden of disease that is common in developing countries. Whereas the private sector focuses on research and development and is heavily reliant on patents.
The role of patents is clear – protect owners of IP in the pharmaceutical industry from IP theft or copycats looking to reproduce products at a cheaper price. The process of product development, from idea to marketable product, cannot be predicted in the pharmaceutical industry. The research and clinical trials necessary for drug development can take between seven and eight years, and require substantial investment. Whereas the finished product, a pill for example, could be manufactured at a low cost and extremely high volume. Patents are vital to protect IP owners from significant revenue loss and to safeguard the pharmaceutical industry’s development and innovation in the future.