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ABSTRACT
The last two decades saw sweeping changes in the pharmaceutical patent policies of the developing countries from weak/non patentability to strong patent regimes. Analysing the policy change from a political economy approach, this paper pursues two simultaneous objectives. Firstly, it explores the common factors underlying the recent changes in the pharmaceutical patent policies of the developing countries. Secondly, it analyses the sources of the differential policy outcomes on pharmaceutical patents in India and Turkey.
Against the state-centric theories that interpret the policy change primarily as a matter between the nation states from developed and developing countries, the paper presents two arguments. Firstly, it argues that the increased structural power of the transnational capital has been the common factor underlying the recent changes in the pharmaceutical patent policies of the developing countries. Secondly, it argues that the nature, scope, and outcomes policy processes on pharmaceutical patents have been shaped by the dynamics of the inter class struggles across the developing world. The paper supports this latter argument through a focussed comparative historical analysis of the public policy processes and outcomes on pharmaceutical patents in Turkey and India.
Notes
1. See Section 4.3. for an explanation of these flexibilities.
2. In the case of pharmaceutical innovations there are two main types of patents: product patents, and process patents. Product patents provide stronger forms of protection as they prevent the third parties from not only producing, and marketing a particular drug but also from using all other manufacturing processes through which the patented drug can be produced. Process patents are considered to provide a weaker form of protection as they protect only one particular manufacturing process that can be used to produce a patented drug.
3. CitationChowdhury (1995) and White (1983), document several other strategies (i.e. persuasion, trade sanction threats) employed by the transnationals and the US government to offset the interventions of the developing country governments with national industrial property regimes.
4. Besides the pattern of state involvement other certain conjunctural factors also might have contributed to the differential degrees of external dependency. As the development of the pharma-chemicals sector requires substantial scale economies the impact of respective market size in two countries had considerable effects. The restricted size of the domestic market in Turkey had been one of the factors that hindered the cost efficiency of the pharma-chemical production whereas the vast market size in India had been positive stimulant for the development of pharma-chemical production.
5. Ghosh (1988: 2446) categorizes the major Indian pharmaceutical manufacturers such as Bengal Chemical and Pharmaceutical Works, Alembic Chemicals, Bengal Immunity, East India Pharmaceutical Works Calcutta Chemical Company amongst the national bourgeoisie in his categorization of the Indian capital. According to Ghosh (ibid), national bourgeoisie was differentiated from the comprador big Indian bourgeoisie by the weakness of their association with the expatriate capital, by the fact that the source of their initial capital came from their own resources, and by the fact that they mastered production processes and possessed genuine innovative capability for products and machines. For purposes of conciseness, I took the liberty of merging Ghosh's national bourgeoisie with Patnaik's (1972: 215) small urban bourgeoisie categorization.
6. For example between 1965 and 1982 top ten TNCs introduced technology for the production of only nine pharma-chemicals whereas the four public sector companies introduced technology for 36 bulk drugs (CitationMehrotra, 1989: 1061).
7. The local pharmachemical production remained highly dependent on imports. The production of analgesics and anti-inflammatory drugs in the early 1970s were followed by semi-synthetic penicillins and antibiotics. By the end of 1970s, however the local production of pharmachemicals were able to meet only three percent of the local demand. In the 1980s, under continuing protection, the quantity of pharma-chemical production and types of products produced increased significantly. Quantity of pharma-chemical production increased significantly from 1300 tons in 1980 to almost 7,000 tons in 1987 (IEIS, 1989). During the same period the types of locally produced pharma-chemicals also increased from 37 to 111 (ibid). Generous export incentives such as tax rebates and subsidies also boosted exports of pharma-chemicals.
8. Insufficient local production of chemical substances and intermediaries used in pharma-chemical production rendered the sector dependent on imports. For example, in 1998, the local chemical industry was able to supply only ten percent of the inputs used in the pharma-chemical industry while the remaining 90 percent of the inputs were imported (CitationSPO, 2000).
9. For example in 1975 the leading licensee firm Eczacı bası 's product portfolio consisted of a total of 171 drugs, 134 of which were produced under licenses from several transnationals while the remaining 37 drugs were the firm's own brands (i.e. copy products). Another licensee firm Adeka which had a 33-drug portfolio produced 18 of these under license while the remaining 15 were its own brands. Out of the 55 drugs in its portfolio another licensee firm Santa Farma produced 33 of them under license (TIB, 1975: 56).
10. In 1975, out of a total of 2117 drugs in the formulation market, 732 were produced by the transnationals, while the remaining 1985 drugs were produced by the local firms (TIB, 1975: 55–9). Out of the latter, 1,385 drugs were produced under local manufacturers' own brands (i.e. copy products) while the remaining 600 were licensed products. Domestic fraction of the local capital is those firms that entirely or predominantly produced copy drugs with their own brands. For example, firms such as, Anadolu, Dincel, Embio, Kansuk, Yavuz, Sanli, Kurtsan, Mulda, Nobel, Ilsan, Husnu Arsan, Münir Sahin that produced only copy drugs can be considered in the former subcategory while others such as Deva (94 drugs of its own brand, 15 licensed drugs), Mustafa Nevzat (67 drugs of its own brand, two licensed drugs), Bio-farma (19 drugs of its own brand, three licensed drugs) Ibrahim Ethem (84 drugs of its own brand, 26 licensed drugs) Iltas (53 drugs of its own brand, seven licensed drugs), Dogu (54 of its own brand, 11 licensed drugs) can be placed in the latter.
11. Anadolu, Dincel, Embio, Kansuk, Yavuz, Sanli, Husnu Arsan, Münir Sahin could be shown as examples of the small firms that did not engage in pharmachemical production.
12. Large size firms such as Deva, Mustafa Nevzat, Iltas, Fako [idot]noexpandçlar, Fürsan Fermentasyon, Atabay, Abdi Ibrahim engaged in local pharma-chemical production (cf. CitationBilginsoy, S, Demirors, I., Tolunay, O. et al., 1975).
13. The number of firms operating in the industry declined from 25 in 1987 to 11 in 1998 and the production of a range of pharma-chemicals was stopped including the semi-synthetic penicillins which formed an important fraction of production and exports during the 1980s. Alongside local firms, the transnationals, which invested in the sector during the 1970s, exited the sector. Out of six transnationals, which were operating in the industry, there is currently only one left (interview with local company executive). Paralleling the restriction in capacity utilization, the production investments in the sector have also declined from 32 percent of all investments in 1987 to a mere three percent in 1998 (CitationEren, 2002). The contraction in local production of pharma-chemicals in the second half of the 1990s was met by imports and currently only two product types—paracetemol and morphine—remains internationally competitive (CitationSPO, 2000).
14. The cost structure of the firms in the formulation sector of the industry indicates the dependence of production on imported pharma-chemicals. In 1998, only 11 percent of the pharma-chemical inputs used in formulation production were locally produced while the remaining 89 percent were imported. These imports accounted for 86 percent of all pharma-chemical costs (CitationSPO, 2000: 9). Reaching 47 percent of all industrial costs, the imported pharma-chemicals also occupy the highest share within the overall cost structure of formulation production (CitationSPO, 1991, 1996).
15. Although the PhRMA's membership criterion requires US-based operations, a large number of pharmaceutical transnationals from both sides of the Atlantic meets this criterion. The PhRMA in this sense can be conveniently viewed as the voice of the pharmaceutical transnational capital rather than merely the US based transnationals.
16. US Generalised System of Preferences (GSP) initiated first in 1976, is a program that grants duty-free treatment to specified products imported mostly from developing countries. Other industrialized countries such as the EU have similar programs that provide tariff preferences to imports from developing countries.
17. Section 301 provides a domestic procedure whereby the affected US manufacturers/exporters can petition the US Trade Representative to initiate investigations in countries where their intellectual property rights are violated. Many research-based pharmaceutical companies and their association PhRMA used this petition procedure against countries such as Argentine Brazil, Taiwan, Korea and many others.
18. The success of trade sanctions in generating almost uniform compliance from the developing country governments has been due to their distinct financial and political impacts. On the one hand, trade sanctions imposed against the export competitive sectors of developing country economies deprived the governments of precious foreign exchange earnings. On other hand, by imposing penalties on industrial sectors other than pharmaceuticals, trade sanctions significantly increased the extent of domestic pressures on developing country governments.
19. Although TRIPs lays down important conditions under which compulsory licenses could be issued, in principle it does not restrict the grounds on which they could be granted and thus leaves a significant scope for discretion by the national law (Correra, 2000; CitationSouth Centre, 1997; CitationWatal, 2000). The conditions on compulsory licensing in the TRIPs is provided by Article 8.
20. Although the compulsory licensing provisions of TRIPs were initially understood to cover production only for non-commercial use, subsequent clarification in the Doha Declaration made it clear that in cases of national or health emergency developing countries can issue compulsory licenses to third parties either for imports or domestic production.
21. Known as the mailbox requirement, the first one of these articles obliged the developing countries to set up a mechanism as of 1.1. 1995, to allow the filing of patent applications for pharmaceutical and agricultural chemical products during the transitional periods (Article 70.8). Even though developing countries did not have to grant patent protection to these applications until the expiry of transitional periods, they were required to grant five years of exclusive marketing rights when one such patent application in their mailbox was awarded protection and marketing approval in another WTO member state after 1.1.1995, (Article 70.9).
22. The realization of this potential depended to a large extent on the length of the transitional periods and the number of countries that preferred to provide long transitional periods. From the perspective of the transnationals, the longer the transitional periods across the developing countries, the larger were the potential export markets for such products, and the higher were the risks of potential sales, profits and loss of exclusivities. This regulatory loophole and the risks associated with it was partly the reason behind the continuing pressures on the developing countries after the conclusion of the TRIPs agreement.
23. The declaration recognized the right of member countries to determine the grounds upon which the compulsory licenses could be issued, as well as their rights to determine the grounds of national emergency, and other extreme urgencies of public health.
24. Although compulsory licensing was permissible under TRIPs right from the start, the domestic use requirement prevented member countries to export drugs produced under the license. The 30th August 2003 decision of the TRIPs Council eventually set up a system whereby the least developed countries can import patented drugs from other countries (cf. CitationWTO, 2003).
25. Certainly, this does not imply that Indian manufacturers constituted a homogeneous bloc with identical material interests. Like most trajectories of capitalist development, the evolution of the Indian pharmaceutical capital had been marked by divisions in terms of size (i.e. small versus large firms), spheres of activity (i.e. formulation versus bulk drug producers) and the differentiation of material interests associated with such divisions (cf. CitationStoker, 1984: 298). Moreover, as became obvious during the later stages of the policy process on pharmaceutical patents, the boundaries of the policy consensus for exploiting TRIPs flexibilities were also contested by different fractions of the Indian pharmaceutical capital (cf. CitationEconomic Times, 2002a; CitationExpress Pharma Pulse, 2002a)This was most vividly observed in 1999, over the issue of the length of transitional periods, when some fractions of the Indian pharmaceutical capital pressed for further expansion of the transitional periods until 2016. The material basis of this division was between those Indian manufacturers that relied on generic exports for a larger share of their portfolio, and hence were favouring a more protectionist stance, and those which reoriented their strategic plans towards greater R&D, expansion into regulated markets of US and Europe, as well as collaboration with the pharmaceutical transnationals. Overall, however, the lower external dependency on transnational corporations generated a common policy stand amongst the Indian pharmaceutical capital in favour of exploiting TRIPs flexibilities, which enabled them to maintain a fairly unified bloc throughout the policy process.
26. Commercialization of the agriculture, in particular, led to the growth of regional bourgeoisies which came to form the constituency of the political parties that acquired power at the level of state governments (ibid). Alliances formed by these parties at the federal level created important rivals for the broad coalitions that were held together by the Congress Party throughout most of the Indian history.
27. As frequently voiced by both local manufacturers and non governmental organizations, there are still a wide range of concerns and uncertainties related to the implementation of the regime which the amendments did not address. Amongst these areas are the ambiguities that are related to the procedures for granting of compulsory licenses, in particular the lack of specifications of the concepts such as reasonable time and royalties (CitationNarrain, 2005: 17; Sen Gupta, 2006a: 4).