Managing IPR Issues In Strategic
Partnerships And Contract
Research
Dr. M.D. NAIR
Hyderabad
25.8.2003
Role Of IPR Protection In Healthcare Industry
- Of All Business Segments, The Healthcare Industry is the most
R&D- Intensive and Innovation-driven Industry.
- The rate of Obsolescence in this Industry is the highest. > 60%
of the Drugs used today did not exist 20 years back.
- In 2001, the U.S FDA approved only 24 New Drugs the lowest
number in the last ten years.
- During the same period 8 of the leading Companies failed to get
even one major drug in the market.
- On an average only 3 out of the 10 drugs in the market recover
their R&D costs and the other 7 are an additional burden on them.
- The costs of a new drug including for failures are estimated
around $ 800 million
- In order to recoup such investments an economic reward
system has to be assured and IPR is one of the instruments to
assure that .
Drug Discovery In Need Of An Overhaul
Report of Andersen Consulting (1997).
To keep pace with the need for 10% annual
growth, top 10 companies need to launch 5
NCEs each per year with average turnover of
US$ 350 mio. each.
Today, they are launching an average of 0.45
NCEs per year and only 8% of new drugs
reach the threshold sales.
The strategies employed by large Companies
are to get bigger and bigger.
How Big Can You Grow?
Ciba-Geigy-Sandoz (Novartis)
Marion-Merrill-Dow-Hoechst Roussel-Rhone PoulencRorer (Aventis)
Richardson-Merrell-Proctor & Gamble
Kabi-Pharmacia-Upjohn
Bristol-Myers-Squibb
AHP-American Cynamide
Astra-Zeneca
Bayer-Sterling
Glaxo-Burroughs Wellcome- SKB
BASF-Knoll-Boots
Roche-Syntex
Pfizer - AHP-Pharmacia-Upjohn
Pitfalls Of The Western Model Of R&D
-
High and unaffordable costs of R&D, the cost of a
new product developed quoted at >U.S. $ 800 Mio.
and a time period of 10 to 15 years.
- No product will be developed by the MNCs, which
does not have a potential market of < U.S.$ 350 Mio
per year.
- The products needed by the developing countries
are unlikely to command such markets.
- India is one of the Countries, which has the
capability to discover new drugs and hence could be
a leader among developing countries in this field.
- Government can Support the Industry to achieve
this, in many ways.
In Pharma Business Like Everywhere Else There Are
Davids And Goliaths
Large MNCs are becoming Goliaths by mergers and believe
that bigger is better.
Others believe that Davids are effective too:
Look at Amgen, Genentech, Janssen, etc.
The Goliaths cast a wide net to catch big fish, but in the
process, their boats might capsize.
India can take only ‘David’ Route.
“ In the old
Darwinian
economics, the big
ate the small – in
the future, the fast
will eat the slow. “
Indian Drug Discovery Research Model.
Even the largest Indian Companies do not have the resources, technical skills or
marketing ability to reach global markets.
Companies therefore need to follow the Japanese model of carrying out limited
discovery programs, patenting the products and licencing the patents to major
MNCs Drug Development.
A strong Patent is thus an essential pre-requisite for entering into an effective
and commercially rewarding collaboration with a leading Company.
New Approaches For Indian Research*
*These unique strengths should be converted into Intellectual Property worthy of licensing
System-based
Alternate Systems Of Medicine
Therapeutics-based
New indications for existing drugs
through clinical research
Product-based
Biotechnology, NDDS, Chiral
Products
Process-related
Bio-catalysis and other ecofriendly and cost-effective
processes.
Competitive Structure Of Indian Pharma Industry
Current
Poor IPR protection
Highly fragmented
Commodity markets
Industry rivalry high
Price wars
Emerging
High IPR protection
Consolidation through
mergers and acquisitions
Exclusive markets via own
IPR or Licences
More realistic competition
Less Price wars, more
profits
Strengths & Weaknesses Of Indian Pharma Industry
Strengths
Weaknesses
1.
Mature Industry with
strong manufacturing
base
1.
Inadequate resources
2.
Strong in chemistry and
Chemical Process
Engineering
2.
Poor R&D background
and culture
3.
Abundance of new talent
3.
Inadequate clinical and
regulatory network.
4.
Entrepreneurial spirit
4.
Low profitability of
industry
5.
Possibility of networking
with Indian Scientific
Diaspora abroad.
5.
Commodity markets in
the absence of IPR
6.
Lack of International
marketing strengths
Indian Companies’ Strategies
Should Be To:
Compete where you can,Collaborate
when you must
Objective:
Building Win-Win strategies to ensure growth and
progress in the Corporate world through Strategic
Alliances.
Partners however have to follow minimum ground
Rules. Accepting global IPR protection systems is
one of them.
Major Issues Affecting The Pharma Industry
IPR Issues
-Implementation Of TRIPS Agreement By 1.1. 2005
- Fair & Equitable resolution of Contentious Issues:
- Patentability Of Life Forms
- Compulsory Licences
- Geographical Indications
- Biological Diversity Act.
- Trade Secrets and Data Exclusivity.
- Para 6 Of Doha Declaration
Indian Industry Can Achieve Global Standards, & Acceptance as
well as Access Global Markets if they respect an internationally
harmonised Patent System
Thereby It Can enter into collaborations And Strategic Alliances
in Areas Such as :
-R&D for New Drugs
-Contract Production
-Manufacturing Base For generic Drugs
-Development & Marketing of Traditional Products
Paradigm Shift In Approaches To Ensure Growth And
increased Profitability
- In Knowledge Industries, instead of total vertical integration, emphasis on
Core Competencies.
- More Externalisation to supplement and augment internal core
competencies.
- Except in cases of Committed Joint Ventures, no Permanent Partners, only
Permanent Interests.
- Partnerships To Be based on Common Objectives, Strategic Match,
Meeting of the Minds and Mutual Benefits (Win-Win).
- Joint Venture Partnerships To be based on Shared Responsibilities, Shared
Risks and Shared Benefits.
Nature Of Strategic Alliances
Apart from Acquisitions where a large Company buys
out a smaller one, the other forms of alliances are:
- Mergers on defined terms and guaranteed rights for
Stake Holders.
- Joint Ventures with Equity Participation from both
Partners equally or unequally.
- Short or Long Term Contractual Partnership for:
- R&D.
- Custom Production.
- Manufacturing.
- Marketing.
Patents and Trade Marks , two important Intellectual assets of a
Corporation are important only when the Contract is for joint
R&D. In other cases the Patents would have been already
obtained and both confidentiality & exclusivity guaranteed to the
Patentee.
Key IP Issues That Strategic Alliance
Agreements Should Address
- Define the IP that is brought into the joint venture.
- Ensure that the parties own the IP that they claim to
own.
- Ensure that IP is valid and does not infringe others’
property or are in the public domain.
-Clearly define the ownership of future IPs.
-Establish Patent Prosecution obligations.
-Agree on terms of cross licensing of IPs to one
another.
-Finalise the value of the IPs brought in by the partner .
-Define each partner’s rights to IP in case of termination
of an alliance.
Importance Of Strategic Alliances &
Contract Research
- Cost Of R&D on New Drugs prohibitively high
even for the top Corporations and pressures for
cost reduction.
- Difficulties in developing and Sustaining State Of
the Art Competencies in an ever-changing
technology scenario.Lack of internal Capacity to
pursue too many leads.
-Availability Of cost-effective, quality outsourcing.
International Scene
- Strategic Alliances between Pharma Companies have gone up
from 248 in 1987 to 635 in 2000.
- 20% of R&D Budgets were being allocated to external alliances
in 2002 .
- Market for outsourced drug discovery services expected to
grow to $ 8 Bio. by 2005.
- From 1995 to 1997, more than 60 Agreements made between
Pharma Companies and Combinatorial Chemistry / Discovery
Chemistry Companies.
- It is estimated that based on the growth in Clinical Trials over
the last five years, another 24,000 qualified people would be
required by CRO industry in the next three years.
- Quinteles, Parexel, Covance & PPD together have spent $ 95
Mio. for electronic data processing alone.
Alliances Through Licenses
.
Exploitation of Intellectual Property is often the
Corner stone of Strategic Alliances.
For example two firms one with a mature
product line and a weak pipe-line would like to
join hands with another firm with a new
invention to enhance their portfolio.
If the second Company lacks the critical mass
and skills required for product development,
there is a perfect partnership, provided their
chemistry gels.
Benefits Of Licensing
In- Licensor
- Access to Novel technologies
Out- Licensor
- Commercialisation
complementing existing ones.
Of your invention.
- Access to IP and Scientists skilled
- Minimises risk of
in Intellectual Property.
Development.
- Reducing Risks inherent in early R&D.
- Ensures sharing of
revenues.
- Expansion of Patent & Product Portfolio.
- Ability to leverage
global presence.
Key Issues in Collaborating with large MNCs
1) Maintaining Confidentiality through out the period
of Agreement and even afterwards.
2) Respecting Patents and other IPs including Trade
Marks, Trade Secrets (Know-How).
3) Valuation of all activities.
4) Meeting Statutory as well as partner’s regulatory
and other standards.
5) Well-defined Deal structures.
6) Strict adherence to terms of the Licensing
Agreement.
All these to be negotiated at the beginning and
remember that you are primarily negotiating with
people and not Organisations
Successful Collaborations
depend on:
- Appropriate Due Diligence.
- Understanding of the Nature Of the Deal Structure.
- Strategic Match.
- Quality Of Science & Scientists.
- Quality of Facilities, Infrastructure & Resources.
- Relevance of Patent portfolio, Timing and Nature
of the Deliverables.
- Complementarity of Strengths with possible
synergies.
- Value For Money.
- Transparency in all dealings & Mutual Trust.
Failure Of Collaborations has been due to
absence of one or more of these factors
Types Of Contract Research.
1) Contract R&D
2) Custom Production of R&D molecules for
Pre-clinical & Clinical Research.
3) Contract Production for Marketing
3) Clinical Research
Why Would India Be A Strategic
Location For Contract Research ?
Areas Where India has strengths In Pre-clinical
Testing Of Drugs
 In-vitro screening & Animal pharmacology
studies.
Areas where India Needs To Develop more
Expertise
 Animal toxicology studies including
Carcinogenicity.
 Animal Reproductive and Teratology
studies
 Animal ADME studies
Clinical Testing
IND
Phase-I
Application
Normal healthy male volunteers to
determine human tolerance and threshold
of therapeutic dose; ADME studies
To determine efficacy at tolerated dose
levels. Requires efficacy only against a
Phase-II placebo; not another drug. Short-term
studies II-A and longer term II-B – 200300 patients.
PhaseIII
Open larger multi-centered trials.
Good Clinical Practice (U.S.A.)
1962
1961
Drug Amendments Act
Thalidomide
1963
IND Procedure
ORIGINS
1977
1964
Proposed FDA Regulations covering
obligations of Sponsors, Monitors
and Clinical Investigators
Declaration of Helsinki
WHY THE COSTS GO UP? More Stringent
Clinical Trials & More Voluminous Data
Average No. of Clinical
Trials / NDA
Average No. of Patients per
NDA
1981-84
1999-00
30
68
1,321
4,237
Compulsions of MNCs To outsource Clinical Research:Complexity
of Regulatory Standards
No. of Words In Documents
Pythagoras Theorem
24
Archimedes Principle
67
The Ten Commandments
179
American Declaration of Independence
300
European Legislation on when and
where one can smoke
24,942
Average IND Submission to FDA
800,000
FOR INDIA TO BE A GLOBAL
PHARMA R&D PLAYER AND A
CENTRE FOR OUTSOURCING ,
WE NEED SYSTEMS & FACILITIES
FOR GLP, GCP, GMP ETC.,
ACCEPTABLE BY
INTERNATIONAL REGULATORY
AGENCIES.
Why Destination India ?
Contract R&D Synthesis & Pre-clinical Screening, Skilled Manpower,
Infrastructure & Low Cost.
Custom Synthesis & Contract ProductionChemical Synthesis, ChemicalTechnology & Low Cost.
Clinical ResearchAvailability of Clinical Subjects, Skilled Clinicians,
Expertise in Statistical Analysis & Documentation,
Language & Communication And Low Cost
I find the important
thing in life is not so
much where we stand,
as in what direction we
are moving.
Oliver Wendell Holmes
Alice:
“ Which direction should I go? ”
Cat:
“ It depends a great deal on
where you want to go. ”
Lewis Carol in Alice in Wonderland
Alice:
“ But I don’t know where I want
to go? ”
Cat:
“ In that case, it really doesn’t
matter which direction you take.”
Lewis Carol in Alice in Wonderland