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This post was originally posted on the Rising Powers and Interdependent Futures blog.

In a recent special issue of Critical Perspectives on International Business Rory Horner observes how established multinational pharmaceutical firms are seeking, with different degrees of success, to alter the intellectual property institutional environment in rising power economies. The contrasting cases of India and South Africa highlight that MNEs’ attempts to fill so-called “institutional voids” may not always fit with societal best interests.

Rising power economies are potentially major growth opportunities for multinational companies. In the pharmaceutical industry, the “pharmerging” markets include the BRIC (Brazil, Russia, China and India) countries as well as Mexico, Turkey and South Korea, are a major focus for expansion.

Established multinationals counter a different institutional environment in emerging economies. Notably, they can encounter different systems of pharmaceutical patent protection – with either shorter duration and/or narrower scope of patentability in the global South.

The rising power economies are currently a key focus of contestation around the setting of IP rules. The dramatic growth of the BRIC countries could potentially challenge the trade rules around patents, including those in pharmaceuticals, which have been mostly driven by firms and countries from the Global North.

Continued business and diplomatic pressure from the Global North has and is being placed to secure and maintain extensive and long patent protection, with rising powers subject to particular attention. This was true in the formation of the World Trade Organisation’s Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement, as well as recently with intense debate around proposed recent changes in India, Brazil and South Africa.

The contrasting cases of India and South Africa are explored in this new article. Although both involve MNEs seeking to influence pharmaceutical patent law, South Africa has been quite prolific in granting patents, whereas India has been less so and has long been a thorn in the side of multinationals as a result.

India – MNEs’ struggle for institutional change
India has also been at the centre of contestation around pharmaceutical patent laws. Benefiting from local technological capabilities and restrictions on MNEs, product patents were removed in 1970 and domestically-owned pharmaceutical companies grew rapidly. With the onset of economic reforms in 1991, India has since risen to become the supplier of the third largest volume of pharmaceutical products in the world. In response, multinationals consistently sought and succeeded in securing patent law change in India, and India was even seen as a key motivation for the broader US efforts in relation to patents in the trade negotiations leading to the formation of the WTO and the Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement.

Even since TRIPs was agreed to in the late 1980s, multinationals have continued to seek to influence India’s pharmaceutical patent laws. India has constantly featured in the United States Trade Representative’s annual Special 301 Report, introduced in 1989 to identify trade barriers for US companies due to IP laws. India has never dipped below “Priority Watch List” level on the Special 301 Report in its 27 editions to 2015. This pressure continued after India issued its first compulsory license under TRIPs in March 2012 to Natco Pharma to produce Nexavar.

South Africa – MNEs’ efforts to maintain broad patentability
South Africa is a contrasting case to India, with a much wider degree of patentability. With patent legislation in place as early as 1916 and the current statute since 1978, a later Intellectual Property Laws Amendment Act was passed in 1997 (subsequently amended in 2002 and 2005) to make South Africa TRIPs-compliant. MNEs have engaged in significant efforts to maintain the relatively broad scope of patentability, notably in two quite recent controversies.

South Africa’s pharmaceutical patent laws initially came to global attention in the late 1990s with a high-profile court case over proposed reforms to the Medicines and Related Control Substances Act to allow for parallel importing and compulsory licensing. The Pharmaceutical Manufacturers’ Association (PMA) of South Africa (mainly comprised of multinational or MNE subsidiaries as members) claimed the proposed reforms were in violation of WTO TRIPs obligations and unconstitutional. The MNE campaign however was visibly challenged by civil society organisations, most notably the Treatment Action Campaign (formed in December 1998). Although the lawsuit was eventually abandoned, South Africa has continued to be quite generous in granting of patents, more than international law requires and lacking many of the flexibilities present in the WTO’s TRIPs Agreement.

Recent proposed reforms to South Africa’s laws, in the form of a Draft National Policy on Intellectual Property put forward by the South African Department of Trade and Industry in 2013, have also attracted considerable controversy. Providing for higher standards for patentability, as well as possibilities of pre-grant opposition, the draft policy has attracted concern from international business groups and pharmaceutical MNEs. For example, the proposal was noted in the US Chamber of Commerce’s (GIPC) submission (7 February 2014, USTR– 2013-0040) to USTR’s 2014 Special 301 Report. A campaign coordinated by a firm Public Affairs Engagement, funded by PhRMA and the Pharmaceutical Association of South Africa (IPASA), to derail the reforms, attracted widespread condemnation. This campaign of MNEs attracted criticism from the Director General of the World Health Organisation, from Médicines Sans Frontières and from the South African Health Minister.

Beyond the “institutional void”
Rising powers cannot be accurately characterised as “institutional voids” which MNEs should fill for societal benefit, as some business strategy literature would suggest. Instead, in emerging economies, MNEs encounter a plethora of institutions that may be suited to serving local societal interests, such as the growth of emerging economy firms and serving health interests. Ultimately, rising powers may not be expected to inevitably converge towards or emulate those institutional environments practised in the Global North, but instead are likely to set their own agendas in accordance with their increasingly heterogeneous interests.

Re-blogged from the Global Development Institute blog:

With the potential to ameliorate pain and even save lives, pharmaceutical products can have greater impact than those of almost any other. Yet, in overviews of research on development, somehow the pharmaceutical industry does not feature as prominently as, for example, extractive industries or textiles.

In a new article in Geography Compass, I argue that the pharmaceutical industry can tell key stories for development – in particularly highlighting the need to bridge the oft-present dichotomy between the economic and industrial or social aspects of development.

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For a long time, it appeared that there was little positive to say about the pharmaceutical industry in relation to its contribution to development. Post-independence, most developing countries found themselves relatively dependent on multinational companies for the imported supply of medicines and the sector was widely viewed as exemplifying the problems of dependent development. In the 1970s, the establishment and promotion of local pharmaceutical production attracted considerable policy interest among developing countries seeking to overcome the dependence on multinationals from the global North, with some support from United Nations Conference on Trade and Development and United Nations Industrial Development Organization. Yet, many countries, like Pakistan and Sri Lanka, faced a backlash from multinationals and few succeeded. Even in those limited cases where efforts to promote local industry did succeed, such as India and Argentina, the immediate benefits for health were questionable. Particularly from a public health perspective, the struggles with the pharmaceutical industry ranged from questions of production to such issues as essential drugs, marketing, quality control, price control, pooled procurement and the utilisation by health workers and patients.

As the policy momentum in support of local production in the Global South declined and as neoliberalism became more ascendant with the onset in the late 1980s of Washington Consensus liberalisation, research on pharmaceuticals shifted towards patent issues, a crucial aspect of the institutional environment for the industry. Considerable attention surrounded the World Trade Organisation Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement, finalised in 1994, and which came into being in 1995. This controversial agreement required all World Trade Organisation (WTO) members to sign up to standard minimum patent protection, with developing countries allowed a 10-year transition, and least developed countries a further extension to join. The agreement echoes key trends in the wider field of development in demonstrating the institutions-led agenda of global governance bodies such as the WTO and in reflecting the influence of Northern multinational corporations and states in pushing policy changes in much of the Global South. The issue could be characterised as one of institutional monocropping – importing institutions from the global North to developing countries with little sensitivity for differences in context.

More recently, however, a growing body of research has now begun to identify some positive connections between health and industry. The availability of underlying industrial capacities to produce generic medicines has been essential for the success of international political mobilisation to promote access to medicines. This notably also includes the influential Treatment Action Campaign in South Africa. Indian companies have played a key role in supplying a large share of the global purchases of anti-retroviral medicines, particularly for donor-funded purchases. Indeed, the humanitarian medical activists, Médecins Sans Frontières have even pointed to the key role of India’s “pharmacy to the developing world”, which has been a crucial industrial support for the global access to medicines campaign. A somewhat autonomous local pharmaceutical sector has pushed for public-health oriented reforms in Brazilian patent law.

To be clear, major challenges remain for fulfilling the health possibilities from the industrial capabilities of the pharmaceutical industry. Particularly in relation to new product development, an enduring question is the persistent challenge of medicines for neglected populations, where limited market incentive exists for investing in R&D and where consumers have limited purchasing power.

A long standing characteristic of development has involved negotiating between economic, or materials goals, and the social, or human, dimensions. Within development studies, both have often been presented as antithetical, or at best compartmentalised. Improved development outcomes related to pharmaceuticals often appear to draw both on an underlying material base, promoted through industrial and health policy interventions, and on civil society mobilisation over health and access to medicines. Building, and understandings connections between the economic and social aspects of development is not unique to pharmaceuticals, nor to the Global South.

Yet arguably research on the pharmaceutical industry provides a challenge particularly in relation to understandings of the conditions under which economic and health, as well as wider social goals, can be complementary. In doing so, crossing disciplinary boundaries may prove a necessity. Given ongoing challenges for global health, as well as the industry, pharmaceuticals will continue to be crucial for development outcomes globally.

These are issues I will seek to engage with in my new ESRC Future Research Leader funded-project on ‘India’s pharmaceuticals and local production in sub-Saharan Africa’. This will involve a comparative study across different African regions of the engagement of what has been referred to as India’s “pharmacy of the developing world” and its implications for efforts to promote local pharmaceutical production