Pharmaceutical industry and TRIPS 2016 deadline

There are currently 200 active allopathic pharmaceutical companies in Bangladesh, according to the Directorate General of Drug Administration (DGDA). About 22,000 brands of drugs are sold which cover 1500 types of medication. By producing generic formulations the industry meets 98 per cent of the local demand and also exports to 87 countries.
The pharmaceutical sector of Bangladesh is mostly developed in the areas of  drug formulation and manufacturing of finished products. Some companies have also started producing active ingredients and are also exporting generic medicines.
The sector, according to a market study report prepared by the USA-based Fast Market Research (FMR), increased to about Tk.421.33 billion ($5.42 billion) in 2014 from that of Tk.376.11 billion in 2013 at a remarkable growth rate of 12 per cent.  
Pharmaceutical sales, however, increased to Tk 110 billion ($1.42 billion) (excluding institutional sales and exports) from October 2013 to September 2014 maintaining an annual growth of 10.6 per cent according to IMS-Health. However if institutional sales are included, the pharmaceutical industry would be worth Tk.132 billion ($1.7 billion).

Besides, the sector reportedly received foreign as well as local investments worth over $1.0 billion in 2013. A dozen new drug manufacturers entered the market and 15 existing companies expanded their production facilities during the year.
However, a major area of concern is the economic toll the counterfeit drugs are taking on the revenue-earning capability of the industry. There is no authentic estimate of the loss, yet experts in the relevant field tend to consider the market of counterfeit and spurious drugs to be a sizeable one.
The World Bank estimates that GDP growth stood at 6.1 per cent in 2014 and projects that it will grow by 6.4 per cent, 6.8 per cent and 7 per cent in 2015, 2016 and 2017 respectively which will increase the per capita GDP at a higher rate and will translate in higher disposable income for healthcare. The only alarming piece of information here is that healthcare expenditure both as a percentage of GDP and in per capita terms fell in 2012 for the first time in recent history.
MAJOR PLAYERS IN THE INDUSTRY: According to IMS-Health, the top 10 players took 68.5 per cent of the market. Companies ranked 11th to 20th took 17.23 per cent of the market; the next 11 companies took 8.37 per cent while the remaining 169 companies shared 5.9 per cent among them.
Square Pharmaceuticals led the industry with a market share of 19.21 per cent. Incepta and Beximco took 2nd and 3rd positions with market shares of 10.42 per cent and 8.47 per cent respectively. Interestingly except for Square, Beximco, Renata and ACI, none of the other leading 6 companies in the top 10 are listed in the Dhaka Stock Exchange (DSE) or Chittagong Stock Exchange (CSE).
EXPORTS: Exports grew at 14 per cent on average from the financial years (FY) 2008-09 to 2013-14. Exports in the current FY (2014-15) too show a steady growth.
TRIPS IMPLICATIONS AND THE 2016 DEADLINE: The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) is an international agreement administered by the World Trade Organisation (WTO) that sets down minimum standards for many forms of intellectual property (IP) regulation applicable to WTO Members. According to this, all signatory parties are bound to incorcoporate 20-year product patent protection for pharmaceutical products in their domestic legislation.
Currently, the 48 LDCs are not obliged to enact legislation on product patent rights till 2016. Until then, LDCs can provide no patent protection at all. Some LDCs, however, have implemented full TRIPS patent protection or expanded TRIPS-plus patent protection in advance of the 2016 deadline.
TRIPS provide Bangladesh pharmaceutical firms with patent-free production rights domestically until 2016 and limited exporting advantage. As long as Bangladesh has to import APIs, they will have to buy these from firms which are compliant with TRIPS laws and hence will have to pay higher royalty for these.
 WTO's TRIPS EXTENSION TILL 2021 AND ITS IMPLICATIONS: On June 11, 2013 WTO announced that LDCs will be getting an extension for TRIPS until 2021. The waiver came as "Extension of the Transition Period under Article 66.1 for Least Developed Members". This gave LDC's 8 more years to implement international intellectual property protection rules and threw a shroud of confusion over a parallel WTO waiver for pharmaceutical products conferred on least developed countries until 2016.
The June 2013 extension for LDCs to enforce WTO IP rules will end on July 1, 2021. It temporarily waives the obligation of the LDCs to apply the provisions of the WTO Agreement on TRIPS, except for articles 3 (national treatment), 4 (most-favoured-nation treatment), and 5 (multilateral agreements on acquisition or maintenance of protection).
Since the newly passed extension is for the full TRIPS agreement, it should be considered to apply to all products, including pharmaceutical products. However, no formal declaration was made specifying that the extension was applicable to pharmaceuticals as well, which puts the Bangladesh pharmaceutical industry in uncertainty.
GOVERNMENT INITIATIVE TO ENSURE TRIPS EXTENSION: According to a report published on The Financial Express it will be difficult for Bangladesh to get the transitional period for pharmaceuticals extended under the special TRIPS since this is not a field of common interest of the club of world's poorer nations, given that none of them have the infrastructure required for a large pharmaceutical industry.
According to the report, an official from the Ministry of Commerce said that they are increasing diplomatic efforts for a united stand, and plan to submit a proposal to the LDC group Committee headed by Uganda by February 2015. The plan is to negotiate and discuss with LDC members to formulate a united position on the inclusion of the pharmaceutical sector, and then to place a demand to the TRIPS Council of WTO through the LDC forum.
The benefit that LDCs, who are not producing pharmaceuticals, will get from flexible TRIPS regime is access to drugs at a lower price and the opportunity to develop the industry within the extension period. It is also assumed that if LDCs stay united on this issue, further extension (beyond 2021) may be possible.
IMPACT OF TRIPS ACTIVATION: Once the advantage that LDCs, especially Bangladesh, enjoys in terms of being able to produce patented drugs without paying royalties is revoked, the cost of exporting and even selling such drugs will dramatically increase. On top of this, Bangladesh is yet to be self reliant in terms of sourcing raw materials, and drugs are usually formulated at later stages, whereby most of the value addition is done abroad since 90-95 per cent of the active pharmaceutical ingredients (API) is currently import dependent.    
The writer is Head of Research and Development, Alpha
Credit Rating Ltd.
  syed.munazir@gmail.com