Congratulations to Malta Enterprise

I read with some interest the opinion piece by Joseph Gatt, published in the Classified section of The Sunday Times (January 2).

Mr Gatt saw fit to mix fact, half-truths, misconceptions together with a small dose of wishful thinking in an attempt to bring together a number of quite unrelated issues surrounding the pharmaceutical industry.

Being a regular reader, I have surmised that Mr Gatt is on bringing pressure to bear on the Maltese government to sign the European Patent Convention. I haven't though as yet identified from his writing exactly why he is so passionate about it; could he kindly enlighten his readers?

Having direct personal experience of the generic pharmaceutical industry by working in it for the last ten years, I thought that I might share with your readers some additional information that Mr Gatt (rather conveniently) omitted.

The fact that patents expire is a natural legal consequence of their being granted in the first place since they are granted with an expiry date in mind. Patent exclusivity is a fiscal incentive to inventors for having given something to humanity - when society judges that this has been achieved, the patent expires.

For medicines this ranges internationally between 15 and 20 years. Were patents not time-limited in this way, patients and society would be restricted to using only one supplier of particular medicines forever. This is not generally held to be acceptable because it limits rather than encourages innovation by eliminating competition, quite apart from the obvious public health and economic consequences.

To put it simply, if the inventor of the wheel had possessed an indefinite patent on it, he (or rather his descendants) would be very rich but very few of us would be able to afford cars or even bicycles and the world today would be a very different place. What incentive would he (or his descendants) have to develop a better wheel or an alternative to it?

The next point concerns R&D (research and development). According to Mr Gatt's idealistic (but unrealistic) hypothesis, the big pharmaceutical multinationals will rush to invest in Maltese R&D in the never-ending search for novel drugs if we have better patent protection.

It may be news to him that most R&D money goes where the brains are i.e. to well-established centres of excellence in these fields in a very small number of countries: notably the US, UK, Switzerland, Germany, France and Japan. Even within these countries, investment is concentrated around a few cities with notable universities.

Although intelligence and innovation are not determined by country/location, these companies with good business sense have found it more profitable to concentrate resources in places with a proven historical track record of managing innovation, thus enticing the brains to come to them rather than vice-versa.

This has been the trend in recent years with R&D people leaving Europe, Canada, India and Australia to migrate to the US as well as large companies merging to decrease their R&D overhead expenditure (not increase it). There are quite a few Maltese professionals who have worked or are still working abroad in this capacity.

The reason that brand-name manufacturers spend so much money on new chemical entities is due mainly to post-development work related to modern health and safety requirements since they are dealing with a new compound with no prior track record of use in humans.

When a generic company enters the market, the medicine would have already been safely used for at least 15 years by the originator - i.e. it is no longer new. Thus the main expense for the generic manufacturer lies in producing and testing a medicinal to prove that it reproduces virtually the same effects as the original. There is no comparison between the two expenditures because they definitely do not refer to the same type of costs.

Malta has not snubbed any "prestigious, well-heeled brand-name manufacturers". Indeed they are all very present on the local market (selling and marketing their products) and using Malta as a base to launch their products in North Africa and the Middle East.

The fact that they have chosen and continue not to use Malta as a manufacturing or R&D site is probably a commercial, logistical or investment decision that is definitely not related to Malta signing or not signing the patent convention!

There are other multinational brand-name corporations (non-pharmaceutical) present locally such as Microsoft, Coca Cola and Hewlett-Packard - "weak" patent protection certainly doesn't seem to have bothered them much.

Again, contrary to what asserts, there is no "open enmity" between brand-name and generic manufacturers. It may actually surprise Mr Gatt to learn that many multinationals operate their own or buy from generic companies (usually under different names so as not to confuse customers about brands, logos or prices) in different countries.

Many also use generic companies as contract manufacturers so as to make their own products at more competitive prices (since generic companies don't have the level of overheads that brand-name multinationals have). True, they often clash in court litigation but after all, who can blame them? This is big business and there are millions of dollars to be won or lost.

At the end of some products' lifecycle, rights to originator drugs are often purchased by generic companies if the originators decide to concentrate on the newer drugs in their portfolio. It is also clear that Mr Gatt is completely unaware of the existence of branded generics where a company (whether multinational or small generic) markets a generic with its peculiar identity and brand-name in the same way as new chemical entities. So his use of the term "brand-name manufacturers" is incorrect since he actually means "originator drug manufacturers".

Even the mention of Pfizer and Ranbaxy is misleading. I certainly have no axe to grind here but definitely, comparing the largest pharmaceutical manufacturer in the world with one of the largest manufacturers in India in budgetary terms is like comparing Brussels sprouts with cabbages and rubbishing the former on the merits of their size!

The fact that Ranbaxy lost their court case against Pfizer is neither here nor there - brand name manufacturers lose court cases against generic companies regularly.

Having thoroughly confused his issues (innovation, brand names and originators, generic pharmaceuticals and patents), it was not entirely unexpected that Mr Gatt would reach the wrong conclusion as to the moral of his epistle.

He stated that weak patent protection discourages investment by the brand-name manufacturers. How come then that these companies are setting up or purchasing subsidiaries right now in China, India and the Far East where there is very little (if any) patent protection?

The true moral (unfortunately, for small countries with small markets) is that investment goes where the market (and the money) is. Make the fiscal or business development package worthwhile and you will get investment - no more, no less. No-one in his right mind could be against intellectual property rights. The only underlying issue here is that of not tying ourselves up in knots unnecessarily as a country by signing anything merely to protect third parties' interests.

Fact 1: Malta actually has a (and fast-growing) generic pharmaceutical industry. Fact 2: Malta today has no originator pharmaceutical industry. Fact 3: There is nothing stopping an originator setting up a production or R&D site in Malta if they really wanted to. Fact 4: Patent expiry and generics manufacture is not strongly linked to patent protection and the signing of the European Patent Convention, as I have shown. Fact 5: A cursory search on the Internet will show that the European generic manufacturers' association agrees with the European Commission on the need for patent protection to stimulate innovation and produce new cures.

What they resist (as unfair competition) are unnecessarily long or frivolous patents designed to discourage competition or to simply maximize a product's profit-making life cycle while giving nothing new to mankind in return.

Taking a wider perspective, at stake is the affordability of national health care and medicines provision programmes since in a free-market (but where products are controlled in number and supply for public health reasons) the only real control on unjustified price increases is the threat of generic competition.

Malta Enterprise should be congratulated for taking a pragmatic and proactive approach in this particular case, rather than the idealistic, starry-eyed one that Mr Gatt seems to wish that they had!

Since this is an opinion piece, I will not disguise it as an article by including "references" as Mr Gatt did, possibly to make his opinion seem more authoritative. The facts as stated in my contribution are what they are and they can be easily checked by anyone who bothers to do so.