Opinion in lead

Navigating post-graduation pharma landscape

With the right policy support, pharmaceutical industry in Nepal could be instrumental in meeting the country’s ‘access to medicine’-related targets while developing domestic manufacturing base. The impending graduation from the least-developed country status may cause Nepal to lose flexibilities accorded to LDCs in terms of meeting intellectual property rights under different multilateral legal frameworks that govern the global IPR regime.

Nepal’s pharmaceutical market is worth NPR 45 billion, which is more than five times the value two decades ago, according to the Association of Pharmaceutical Producers of Nepal (APPON). The growth of pharmaceutical sector in Nepal has been around 15 percent with domestic pharmaceutical manufacturers catering to about 50 percent of the Nepali market in volume. As of July 2019, there were 73 domestic pharmaceutical manufacturer producing allopathic/modern medicines. Many of them are large firms. Currently, 30 pharmaceutical manufacturing units are either Good Manufacturing Practice (GMP) certified or are in the process of being certified. Anti-infectives accounts for over a fifth of the medicine consumed and is followed by gastro-intestinal, respiratory, cardiac, dermatological and pain management group accounting for about 8-10 percent.

Likewise, lack of coordination has been affecting SPS/TBT administration, where coordination among government agencies is pivotal. Trade negotiation capacity and economic diplomacy also suffer from lack of coordination. Likewise, lack of coordination among customs and other government agencies prevents an efficient customs-clearance process, thereby increasing costs and time for traders. Similarly, lack of coordination among different government agencies have created issues in ICDs and ICPs rendering them unable to efficiently manage current trade flows. The study found the current coordination mechanism regarding Nepal’s international trade, primarily the apex body, the Board of Trade, is largely non-functional, unable to even hold meetings regularly, and that the absence of dedicated secretariat services has stymied the functioning of the board as well as other trade-related bodies.

Domestic pharmaceuticals manufacturers cater to about 50 percent of the Nepali market in volume terms and about 45 percent in value terms. In cardiac therapeutic groups share of domestic producers is roughly 50 percent, and in orally administered anti-diabetic drugs, the share is 30-40 percent. Almost all technologically complex products such as inhalers, injectables, critical care products, anti-cancer medicines, vaccines and new molecules products are imported. All inputs from active pharmaceutical ingredients (API) to excipients, suspending agents, preservatives, packing materials and other agents and colors are imported. However, the industry association reports 50 percent value addition.

It is reported that the share of patented medicine is less than 10 percent in the production basket of pharmaceutical companies. There is also a lack of organized data on production of on-patent and off-patent drugs in Nepal. However, some dominant domestic firms have been producing generic versions of some patented medicines-Gliptins (diabetes), Sofosbuvir (Hepatitis-C), Favipiravir (COVID) and they account for 10-30 percent of their sales.

In Nepal, Department of Drug Administration (DDA) governs all aspects of pharmaceutical sectors—production, import, export, quality, price, etc. The relevant legislations are Drug Act 1978, National Drug Policy 1995, Patent Design and Trademark Act 1965, Copyright Act 2002 and related rules and regulations, and Intellectual Property Policy 2017. Since Nepal is a member of the World Trade Organization, the provisions in WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) also govern pharmaceutical industry when it comes to producing medicines developed by the pharma companies in other countries that are IP protected.

As TRIPs Agreement obliges WTO members to provide patent protection to all fields of technology and sets global minimum standards for the protection of intellectual property for both substantive and procedural standards, the pharmaceutical sector cannot be excluded from the patent protection. The Agreement grants the patent-holder a set of exclusive rights (i.e. to prevent third parties from making, using, offering for sale, selling or importing for these purposes the patent product without consent) for a minimum period of 20 years. TRIPS deals not only with patents but also with other forms of intellectual property rights, such as copyrights, trademarks, industrial designs, geographical indications, and confidential information, including test data of the pharmaceutical products.

The LDCs are exempted from applying all substantive TRIPS standards, except national treatment and most-favoured nation treatment until 1 July 2034 or until such date on which they cease to be a LDC member, whichever is earlier. Nepal, a LDC member, can produce patented medicines without providing patent rights and paying royalty to the innovators under the TRIPS agreement. Most importantly, LDCs are exempted from providing protection for pharmaceutical patents, from providing the possibility of filing mailbox applications and from granting exclusive marketing rights until 1 January 2033 or until such date on which they cease to be a LDC member, whichever is earlier. In addition, countries like Nepal are even granted a waiver regarding notification requirements for issuing compulsory licenses for exports of pharmaceutical products to LDCs or other countries with insufficient manufacturing capacities in the pharmaceutical sector. Bangladesh’s pharmaceutical industry has developed leaps and bounds by utilizing these flexibilities.

Although Nepal will lose such flexibilities upon exiting from the LDC group, impact of a Nepal’s LDC graduation in relation to pharmaceuticals depends on the development of Nepal’s capacity in producing patented medicines. Besides, Nepal needs to actively pursue the extension of TRIPS exemptions for post-graduated LDCs. Such extension is supported by the Twelfth WTO Ministerial conference and Doha Programme of Action for the next decade which invites development and trading partners to consider extending special treatments previously made available as a LDC status or reducing them in a phased manner in order to avoid abrupt reduction.

Besides these attempts at organizing collective support for the LDCs in transition, legislations and policies in Nepal need to be framed by incorporating inherent flexibilities in the TRIPs Agreement so that Nepali pharmaceutical industry is promoted and people in Nepal have access to affordable and quality medicines. Excluding new uses, formulation, doses or combination of previously patented medicines from patentability criteria could provide space to pharmaceutical companies in developing their own variants. Ensuring compulsory licensing, which allows for the exploitation of patented subject matter through government authorization without the patent holder’s consent, for reason of national emergency and public non-commercial use, has proven to be successful in other similar countries. Moreover, provisions to allow export of pharmaceutical products produced under compulsory license to other developing countries or LDC with no or limited manufacturing capacity will be helpful. The 12th Ministerial Conference of WTO also exempts patent protection for COVID-19 vaccine for five years. These legislative frameworks need to be accompanied by effective regulatory oversights while providing ample protection to the domestic industry.

This article is based on the presentation made by Dr. Posh Raj Pandey, Chairman of SAWTEE, at a workshop organized by SAWTEE and Third World Network on 26 July 2022. The workshop was organized to share the findings of a research undertaken by SAWTEE "Preparedness of Nepal’s Pharmaceutical sector to cope with the challenges of the country’s LDC graduation". This article was published in Trade, Climate Change and Development Monitor Volume 19, Issue 07, July 2022.