From Mr J. Gatt

According to the latest budget speech, by the end of this month the government will have chosen who is to be formally responsible for the sector of industrial innovation. The selection will be made from three entities: Malta Enterprise, Malta Council for Science and Technology, and the University of Malta. Because this imminent decision is of national importance, I wish to alert the public that it turns out that Malta Enterprise is actually against the strengthening of intellectual property rights that are so indispensably important to genuine industrial innovators.

A recent article written by Malta Enterprise representatives, (1) Anne McKenna and Mario Galea explicitly states: “The patent climate in Malta is one of the major factors underpinning the location decisions of generic pharmaceuticals manufacturers.” (2) Indeed, with regard to the possible accession of Malta to the EPC (European Patent Convention), McKenna and Galea lament that “as the playing field is levelled, so the unique advantages offered by certain (EU) member States will wither”.(3)

Malta Enterprise is trying hard to accommodate copycat generic pharmaceutical manufacturers, whose business set-up basically consists of swooping onto the market of brand-name pharmaceutical manufacturers, as soon as the latter’s patents expire.

The ability of brand-name manufacturers to keep off the generic “vultures” from entering their turf is directly linked to the robustness of a country’s patent climate. The weaker the patent protection in a country, the more favourable it is for copycat generic manufacturers. Conversely, brand-name manufacturers developing NCEs (new chemical entities) invest only where patent protection is robust.

Both ACCESS Euro Consulting’s “Full report” that appraised the effects of Malta’s accession to the EPC, (4) presented to the Ministry of Economic Services in 2000, as well as the Malta Enterprise article, envision pharmaceutical R&D (research and development) in Malta for the immediate future, exclusively within the context of generic manufacture, and not in the context of developing NCEs. The implications of this contextual twist are enormous and of grave significance.

Brand-name manufacturers spend approximately $600 million (1997 dollars) to research and develop a NCE. (5) After the NCE’s patent expires, generic manufactures swoop in to wrest market share away from the original manufacturer and developer.

However, the cost of setting up a copycat generic production of the original medicinal is estimated to be only about $1 million. This means that the generic manufacturers Malta Enterprise is so crazy about, spend on researching and developing a medicinal, less than a hundredth of what brand-name manufacturers spend !

If "Malta already enjoys a reputation for high standards of education at all levels”, (6) why is this nation settling for the crumbs on the table? If our vaunted pharmaceutical and chemistry graduates are all that they are cracked up to be, why are we enticing the thrifty generic manufacturers and snubbing the prestigious, well-heeled brand-name manufacturers?

Malta Enterprise is on the wrong side of the fence! There is open enmity between brand-name manufacturers and generic copycats. And in this feud we are unfortunately allying ourselves with measly buccaneers, not with the true innovators!

It pays more to attract investment from brand-name manufacturers to Malta, as they tend to be much more successful and profitable than their generic counterparts. For instance, recently, there was a noteworthy legal joust in the federal courts of the US between the brand-name manufacturer Pfizer, and the generic manufacturer Ranbaxy over the exact expiry date of Pfizer’s patent regarding a medicine sold under the brand name Diflucan. (For the record, Ranbaxy lost the case)

Now consider this: Pfizer is the world’s largest drug manufacturer with a turnover of $45.2 billion in 2003, while Ranbaxy (India's top pharmaceutical company) had a turnover of only $961 million in 2003. (7) The moral of the story is that the most profitable pharmaceutical companies in the world are the patent-protected brand-name manufacturers, not the generic manufacturers who simply copy pharmaceutical products.

Keeping intellectual property rights weak to lure generic pharmaceutical manufacturers (at the costly expense of rebuffing brand-name manufacturers), not only ticks off the real leaders in the pharmaceutical business, but also limits the country's business potential in all kinds of truly innovative business, not just in the pharmaceutical field, but right across the board in all the sectors of manufacture.

For what sensible manufacturer would develop and market an innovative product in a country that has a shaky patent structure, knowing that rivals would immediately steal and copy the product design and begin to market it in competition with the innovator, thereby eliminating any equitable hope of just reward?

Joseph Gatt

References

1. “The manufacture of generic pharmaceuticals in Malta: a first step”, published in the Journal of Generic Medicines, Vol. 2, no. 1 (October 2004), pp. 63-70.

2. Ibid., p. 64.

3. Ibid., p. 66.

4. These reports can be read on-line on the MIC Website (www.mic.org.mt)

5. “Intellectual Property Rights and the Pharmaceutical Industry", a chapter by William McArthur, p. 89, Competitive Strategies for the Protection of Intellectual Properties, edited by Owen Lippert, published by Fraser Institute.

6. “The manufacture of generic pharmaceuticals in Malta: a first step”, p. 69.

7. Business Standard’s “Corporate Bureau in New Delhi” news report, dated 13 March, 2004.