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CONFLICT AROUND THE EMERGENCE OF GENERIC DRUGS

A fundamental principle of French business law is the freedom of trade and industry. This principle is directly related to the principle of the freedom to copy. Nevertheless, there are general limits which relate to the fairness and ethics of business law. These limits influence the behavior of firms on the market. A company can rely on copy, if it doesn’t engage in immoral and wrongful behavior, which would lead to a civil liability action. In other words, you must not abuse of freedom of copy under the pretext of freedom of trade.Intellectual property law intervenes to frame this freedom. More specifically, industrial intellectual property grants the right to a monopoly through patents. Patents grant a twenty-year monopoly to the person who holds it.

According to Jean Tirol, the Nobel Prize of economics, intellectual property is a necessary evil. It is absolute, excessive, and gives too much monopoly power in several industrial activities but we cannot do without it. It aims at stimulating research and development by providing income to its holder. These rights allow the creators to derive financial benefits from their innovations.In France, for a long time, pharmaceutical drugs could not benefit from such protection. The French patent law of 1844 expressly declared in its article 3, that pharmaceutical drugs could not be patented, citing imperative public health exigencies. In 1960 the legal principle was reversed to serve the interests of a pharmaceutical industry subject to increasingly fierce competition.When a pharmaceutical patent expires, any manufacturer can reproduce the original drug and can commercialize it, in the form of a generic drug. This restores the principle of freedom of trade.

The generic drug contains the same active ingredient, produces the same effects on the body and answers the same criteria of effectiveness. The term« generic drug » was coined in the United-States in 1984 with the Hatch Waxman law, encouraging the manufacture of generics by the pharmaceutical sector and establishing a governmental regulatory system.This practice is now enjoying a renewed interest under the incentive of public authorities. Indeed, generic drugs have significant financial consequences and represent a way to control expenses and imbalances of health systems of developed countries, by stimulating competition and enhancing access to medicine. Moreover, it is a way to provide equal access to health care for the most disadvantaged populations. But it is also a financial challenge forthe pharmaceutical industry considering monetary consequences on major laboratories.With this development of generic drugs and public health policies, it is necessary to reconcile the private interest of creators (the pharmaceutic industry) with the public interest and public health, without obstructing innovation. In view of these two conflicting interests, we may wonder if the general interest supersedes private interest of the pharmaceutical industry.


I – Necessary protection of the initial drug through intellectual property law A – The need for a return on investment, source of economic growth The pharmaceutical industry has a major role in the economy. It employed 98 786 employees in 2016, according to Leem. Its workforce, highly qualified, represents 3% of the industrial employment in France. On the other side of the Atlantic, there is Pfizer, one of the biggest pharmaceutic laboratories In the world, with a turnover of 46 billion of dollars in 2018 and 9 billion of profit according to the annual report filed with the SEC by the laboratory.The patent protects the creative company for 20 years. It confers an attractive position on the market compared to competitors that can’t copy the patented innovation. This protection gives to the innovative company a privileged place on the market, as the only one who can produce and sell the good. This exclusivity allows a return on investment. This aspect is essential, as the resources needed to create a new drug are considerable. Indeed, a discovery can take a decade and require countless researchers and considerable equipment: a big cost for the company. According to the laboratory Fabre, it takes 10 000 hours to find a patentable molecule. Hence, it requires time, heavy investment, and employing qualified research teams. Intellectual property is a way to secure a source of profit for the company.However, the patent is a time-limited right, it offers temporary protection. In the end, the good reverts to the public domain. This is especially the case for drugs and generic drugs. At the end of the patent, anyone can copy the molecule. That’s why this period of twenty years is crucial for the innovative company.


B - A necessary protection, source of innovation The patent is also there to stimulate technical innovation. Indeed, the return on investment is usually the precursor for the conception of new products. For most of the technology companies, a successful invention results in more effective ways to sustain their activity or create new commercially viable products. The improved profitability of the company is the result of added value in a larger revenue stream or greater productivity, which explains the need to patent the discovery of a new molecule. Every private company is looking for profit, and this profit is crucial for its sustainability.Innovation is a competitive strategy for a private company. It is, in fact, the primary determinant of its success. This concept is particularly applicable to the pharmaceutic industries. It is a process which consists in putting new valuable products (goods and services) on the market. This comprises the entire process from formulating an idea or a concept to launching with success a new product on a given market, designed to satisfy the consumers’ needs.The amount of patenting can constitute a good indicator of the innovative capacity of an economic sector. In the field of pharmaceutical drugs, patents are filed well in advance of commercial exploitation, even before clinical development begins. It takes 10 to 12 years, from the identification of the active ingredient, to introducing the product to the market. The protection from competition of generic drugs is at best 8 to 10 years, over a total patent term of 20 years. For this reason, the supplementary protection certificate was established in 1993, extending the term of the patent protection by up to 5 years.Innovations are sources of economic profitability; it directly benefits its creator and serves its private interest. In addition to the economic interest that goes with an innovation, it also serves the general interest, enabling everyone to live in good health and by promoting the well-being of everyone at any age. Every new discovery has the potential to improve everyone’s health. The right to health is a fundamental right, according to the WHO (1946), « The enjoyment of the highest attainable standard of health is one of the fundamental rights of every human being without distinction of race, religion, political belief, economic or social condition. The health of all peoples is fundamental to the attainment of peace and security and is dependent upon the fullest co-operation of individuals and States ». According to the Universal Declaration of Human Rights (1948): « Everyone has the right to a standard of living adequate for the health and well-being of himself and his family, including food, clothing, housing and medical care ...» (article 25).Patent protection is therefore essential to the pharmaceutical industry. Profit from the protection of their innovation is inherent to their sustainability. Nevertheless, it must also be noted that it can be detrimental to the general interest and public health. We can observe inequalities in treatment and access arise between developed and developing countries, or even between those benefiting from good coverage and those without.


How can we reconcile the right to health (general interest) and patent law (economic interest), two branches of law that serve conflicting interests?



II - A controversial protection of patented drugs with regards to public health A - The generic drug at the service of common interest The price of generic drugs is the main rationale for their existence. In France, their price is regulated by the Economic Council of Health Products, proportionally to the initial drug. What constitutes the price of the initial drug is the profitability of years of research needed to develop it. In France, the generic drug is accordingly about 60% cheaper than the original.Market share of generic drugs is growing. Their prescription and dispensing are encouraged by health cost reduction policies in different developed countries. In France, generic drugs have saved 7 billion euros over 5 years to the health system. However, France is not the biggest consumer of generic drugs. They account for 1 in 3 boxes of drugs (37 %). In the United-States, generics are widely distributed and represent 89% of the prescriptions, which represents a savings of 734 billion dollars over 10 years for the American health care system.During negotiations on the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the subject of patents on pharmaceutical products was the most divisive, prompting severe opposition from developing countries, fearing that stronger patent protection would hinder access to drugs.

However, the Doha Declaration on the TRIPS Agreement reaffirmed the right for developing countries to protect public health, to ensure universal access with affordable cost to drugs and essential vaccines. A right to drugs was also established in the Alma-Ata Declaration on Primary Health Care: « Governments have a responsibility for the health of their people which can be fulfilled only by the provision of adequate health and social measures », among which the supply of essential drugs.International comparisons show that copies of patented drugs are cheaper in markets that do not offer any patent protection. The Indian market is an obvious illustration, with no protection but the cheapest prices in the world. In a study of 12 drugs for a range of diseases, US prices varied from 4 to 56 times the price of equivalent formulas in India. Given these price differences and the precariousness of some territories, we could see the rise of counterfeit drugs. This is what the WHO has pointed out in a study showing the recent trafficking of fake drugs, very popular in low and middle-income countries where 1 out of 10 drugs are counterfeit. Fake antibiotics alone are believed to be responsible for the deaths of 72,000 to 169,000 children from pneumonia every year worldwide.Public authorities must face the challenge of finding the right compromise between protecting the interests of pharmaceutical companies and the development of generic drugs.


B- The diversity of means offered by intellectual property to the pharmaceutical industrie Once the patent has expired, the pharmaceutical industry has other ways to counter the development of generic drugs. Pharmaceutical companies are beginning to respond by offering their drugs at lower prices to encourage doctors to continue to prescribe their products rather than the generic drug. Also, the Social Security Financing Act of 1999 has introduced the possibility for pharmacists to replace the official drug with a generic one from the same pharmaceutical group.Moreover, the drug is distinguished by its brand. We notice that many consumers are attached to the brand concept, translated by shape, color, packaging. Trademarks, therefore, make it possible to extend commercial benefits beyond the term of a patent, as is the case for Aspirin®. Created in 1897 by Felix Hoffman, a chemist of the Bayer Company in Germany, the drug was patented in 1899. Knowing that patents have a limited lifetime, Bayer company created a brand promotion campaign for its new product. When Aspirin’s patent expired, the company continued to benefit from the sale of aspirin thanks to its trademark Aspirin®.Once the generic drug is available, the laboratories do not lose all market share. For instance, French people are suspicious of new drugs. Even if the generic drugs were quickly accepted in rural areas, by people on lower incomes, it is still struggling to establish themselves in large metropolitan areas where patients prefer to pay more for what they believe is better.So, the pharmaceutical industry can rely on these different means once the patent is obsolete, which could in some cases lead to a brake on innovation. Some had

thought of the neutral package like what has currently been implemented for cigarettes, to avoid consumers relying solely on the brand and more easily identifying what is in the drug. This idea was not retained.


Pauline DEBORDE

Sources:

https://www.wipo.int/wipo_magazine/fr/2017/06/article_0002.html https://www.iracm.com/observatoire-thematique/propriete-intellectuelle/ https://journals.openedition.org/cdst/275

http://remed.org/wp-content/uploads/2016/11/Présentation-ARobine.pdf

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