Malta Enterprise goes for the crumbs

It transpires that Malta Enterprise is not in favour of strengthening intellectual property rights in Malta. This is the gist of a recent article written by Malta Enterprise representatives,1 where Anne McKenna and Mario Galea explicitly state: "The patent climate in Malta is one of the major factors underpinning the location decisions of generic pharmaceuticals manufacturers."2

Indeed, with regard to the possible accession of Malta to the EPC (European Patent Convention), McKenna and Galea lament that "as the playing field is levelled, so the unique advantages offered by certain (EU) member states will wither".3

Malta Enterprise is trying hard to accommodate copycat generic pharmaceutical manufacturers, whose business set-up basically consists of swooping onto the market of brand-name pharmaceutical manufacturers, as soon as the latter's patents expire.

The ability of brand-name manufacturers to keep off the generic "vultures" from entering their turf is directly linked to the robustness of a country's patent climate.

May I here point attention to the term R&D (Research and Development), in relation to the pharmaceutical industry.

Unfortunately, both ACCESS Euro Consulting's "Full report" that appraised the effects of Malta's accession to the EPC,4 presented to the Ministry of Economic Services in 2000, as well as the Malta Enterprise article, envision pharmaceutical R&D for Malta for the coming future, exclusively within the context of generic manufacture, and not in the context of developing NCEs (new chemical entities). The implications of this contextual twist are enormous and of grave significance.

Brand-name manufacturers spend approximately US$600 million (1997 dollars) to research and develop a NCE.5 After the NCE's patent expires, generic manufactures swoop in to wrest market share away from the original manufacturer and developer.

However, the cost of setting up a copycat generic production of the original medicinal is estimated to be only about $1 million. This means that the generic manufactures that Malta Enterprise is so crazy about, spend on researching and developing a medicinal, less than a hundredth of what brand-name manufacturers spend!

If "Malta already enjoys a reputation for high standards of education at all levels",6 why is this nation settling for the crumbs on the table? If our vaunted pharmaceutical and chemistry graduates are all that they are cracked up to be, why are we enticing the thrifty generic manufacturers and snubbing the prestigious, well-heeled brand-name manufacturers?

Malta Enterprise is on the wrong side of the fence, even economically speaking! We should realise that there is open enmity between the brand-name manufacturers and the generic copycats. And in this feud, we are unfortunately allying ourselves with the measly buccaneers, and not with the true innovators!

Economically speaking, it pays more to entice to Malta investment from brand-name manufacturers, who tend to be much more successful and profitable than their generic counterparts. For instance, recently there was a noteworthy legal joust in the federal courts of the US, between the brand-name manufacturer Pfizer, and the generic manufacturer Ranbaxy, over the expiry date of Pfizer's patent in respect of a medicine sold under the brand name Diflucan. (For the record, Ranbaxy lost the case)

Now consider this: Pfizer is the world's largest drug maker with a turnover of $45.2 billion in 2003, while Ranbaxy (India's top pharmaceutical company) had a turnover of only $961 million in 2003.7

The morale of the story is that the most profitable pharmaceutical companies in the world are the patent-protected brand-name manufacturers, not the generic manufacturers who simply copy pharmaceutical products.

The weaker the patent protection in a country, the more favourable it is for the copycat generic manufacturers. Conversely, brand-name manufacturers developing NCEs invest only where patent protection is robust.

Keeping intellectual property rights weak, to entice generic pharmaceutical manufacturers (at the costly expense of rebuffing brand-name manufacturers), not only ticks off the real leaders in the pharmaceutical business, but also limits the country's business potential in all kinds of truly innovative business, not just in the pharmaceutical field, but right across the board in all the sectors of manufacture.

For what sensible manufacturer would develop and market an innovative product in a country that has a shaky patent structure knowing that rivals would immediately steal and copy the product design and begin to market it in competition with the innovator, thereby eliminating any equitable hope of just reward?

References

1. "The manufacture of generic pharmaceuticals in Malta: a first step", published in the Journal of Generic Medicines, Vol. 2, no. 1 (October 2004), pp. 63-70.

2. Ibid., p. 64.

3. Ibid., p. 66.

4. These reports can be read online on the MIC Website (www.mic.org.mt)

5. "Intellectual Property Rights and the Pharmaceutical Industry", a chapter by William McArthur, p. 89, Competitive Strategies for the Protection of Intellectual Properties, edited by Owen Lippert, published by Fraser Institute.

6. "The manufacture of generic pharmaceuticals in Malta: a first step", p. 69.

7. Business Standard's "Corporate Bureau in New Delhi" news report, dated March 13, 2004 ( http://inhome.rediff.com/money/2004/mar/13ranbaxy.htm )