MABD 650 INTERNATIONAL BUSINESS
CASE ANALYSIS 2
THE GLOBAL BIOPHARMACEUTICAL INDUSTRY: POLITICAL, LEGAL, AND ETHICAL DILEMMAS
The global biopharmaceutical industry develops, produces, and markets medications The industry includes a dozen large firms, including Pfizer (based in the United States. www.pfizer.com),Roche(Switzerland, www.roche.com),Sanofi(France www.sanofi.com), and AstraZeneca (United Kingdom, www.gsk.com). Europe and North America account for most of global pharmaceutical sales, but emerging market countries like Brazil and China are experiencing rapid sales growth and show much promise. The industry achieved worldwide sales of over $1.1 trillion in 2017. The industry is confronted with several challenges.
High Cost of Research and Development
Among all industries, the biopharmaceutical industry invests the most in R&D creating and marketing medications meant to treat everything from cancer to hair loss. Thousands of biopharmaceutical medications allow people to live longer and healthier lives.
Europe and the United States benefit from strong patent protection laws and abundant investment capital. According to industry statistics, it takes 10 to 15 years from initial
discovery to approval of a new medicine. For every 5,000 to 10,000 compounds that enter the research pipeline, only one receives approval. The average R&D investment for each new approved medicine, including the cost of failures, exceeds $1.2 billion. Some estimates are much higher. Only three out of every 10 newly approved medicines are successful enough to recover their R&D costs. For their successful products, biopharmaceutical firms must charge prices high enough not only to recover the high costs of product development but also to recover the cost of products thal never achieve profitability.
Limited Protection for Intellectual Property
Protecting property rights is a key objective of legal systems. Governments grant patents and provide other types of protections for intellectual property. In practice. such protection is often inadequate, especially in developing countries, where biopharmaceutical firms encounter substantial country risk. India has a history of weak intellectual property protection, which has discouraged R&D and innovation. Most people in India have low incomes, and few Indians can afford medications. India has a long history of producing counterfeit and pirated medications, often by violating
the drug patents of foreign pharmaceutical firms. Illicit laboratories in India have freely infringed on drug patents and engaged in a selling free-for-all in the huge Indian biopharmaceutical market. They reverse-engineered patented compounds developed by European and U.S. companies and began selling the pirated generics at drastically
lower prices. Foreign biopharmaceutical firms routinely pursue legal action against these violations, but given limited patent protection, India's generic drug manufacturers have flourished.
The Challenge from Generic Brands
Under World Trade Organization (WTO) rules, a patent protects a drug inventor from competition for up to 20 years. In reality, when the lengthy testing and approval phase
is factored in, the effective life of a drug patent is often less than 12 years. The manufacturer typically has only five to eight years of patent protection in which to recover its investment before generic manufacturers can legally enter the market Once a patent expires, generic manufacturers have the right to produce medications