Intellectual property in pharmaceutical sector: workshop

Economic Development

20 February 2018
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

Professor Caroline Ncube from UCT’s Faculty of Law briefed members on some aspects of intellectual property (IP) insofar as it impacted on the pharmaceutical sector.

Some of the key aspects she covered in her briefing were the five levels of activities in the sector - e.g. imports, packaging and labelling, product manufacturing, Active Pharmaceutical Ingredient (API) manufacturing and research and development (R&D). The latter two - R&D and AIP - were important from an IP perspective as that was where was potential for innovation, new novel ideas, concepts and products.

The process from discovery to eventual manufacturing and regulatory approval was a long and arduous process of around 20 years and typical that was the validity of patents (IP). After this period other manufacturers could manufacture generic medicines that had exactly the same properties as the patented medicines. The manufacturing and licensing process for generics were as strict as for patented medicines. Counterfeit medicines were not linked to generics but were sub standard or falsified medicines.

Patents were one of the most valuable assets a company could have (e.g. Coca Cola recipe) but would also invoke fierce debate regarding its innovation or novelty (was it new or just an improvement on an already existing product or process)

Currently SA did not belong to any of the existing African or International IP regulatory bodies or organisations. At African Union (AU) level, delegates were working on establishing a new Pan African body to regulate IP in Africa, spearheaded by its largest two economies - South Africa and Nigeria. 

In SA, patents were registered with the CIPC, a DTI subsidiary. (CIPC is the Companies and Intellectual Property Commission). A concern was raised that the CIPC lacked technical expertise to adjudicate on patents as their main function was to ensure regulatory compliance in the legal sense and it lacked technical or industry specific knowledge relating to patents.

There was a lack of a clear policy direction from government regarding IP in SA and it was hoped that the recently introduced Draft Intellectual Property Policy Bill of 2017 would address that. 

The discussion with members focused on the difficult and complex process to register patents and its cost (up to R100 000). A concern was also raised on the long time - 20 years - that patents were valid and how it could constrain the supply of cheaper alternatives. Members wanted to know what the procedure was at the CIPC to ensure that patents submitted for registration complied with all legal and technical aspects - specifically technical issues such as the novelty or innovation of a patent - as there was a lack of technical capacity within CIPC. A concern was also raised about the potential conflict between Competition Law, that sought to deter market abuse and Intellectual Property Law that granted exclusivity to patent holders, as the latter could result in market abuse.

Meeting report

Opening Remarks by Chairperson
The Chairperson welcomed Professor Ncube to the workshop and said that the Members were looking forward to the presentation on intellectual property (IP) insofar as it affects the pharmaceutical industry. 

She said the Committee had a recent oversight visit to the Aspen Pharmacare Holdings Limited facility in Port Elizabeth where some concerns were raised regarding government policy uncertainty and its impact on investment.

Briefing by Professor Caroline Ncube 
Prof Caroline Ncube, UCT Faculty of Law, briefed the Committee on IP in the pharmaceutical sector. She said she had taken her lead from an important comment made by Minister Ebrahim Patel during his address to Parliament in the 2018 SONA debate - where he said that government would invest in R&D to create the base for Intellectual Property (e.g. patent) so that the country could benefit from the potential these new technologies would bring to the economy.  

She briefly touched on the five levels in the pharmaceutical value chain - imports, packaging and labelling, product manufacturing, Active Pharmaceutical Ingredient (API) manufacturing and research and development (R&D). The first three activities were normally done under licensing agreement from the owners of the product or processes, while the latter two activities is where innovation took place and where IP came into play.

She said that according to the Department of Trade and Industry (DTI), SA imported around 85% of the country’s total trade of pharmaceutical products (2015 statistics). The exports from SA focused mainly on API medicament mixtures. However players in the local pharmaceutical industry have cited policy uncertainty as a major concern regarding local API manufacture and IP.

Prof Ncube explained the process involved in medicine manufacture that took about 20 years from discovery phase, to receiving a license to market and sell the product, i.e:
-target discovery (new medicine) - year 0
-identify compounds
-establish activity
-select clinical candidates
-testing of the safety of the product - year 5 (year 0-5 termed the DISCOVERY phase)
-at this stage there is an application to conduct clinical trails.
-then follows various phases of Human trials - may contain one to four phases. (from year 5 to 20)
-this period (years 5-20) was called the DEVELOPMENT phase) and culminates with a an application to register the medicine for regulatory approval with the appropriate authorities - to sell and market the product.
Typically patents were valid for 20 years, taking into account the above process. 

She took members through some of the key terminology in use in the pharmaceutical industry - e.g. generic drugs for which the original patent had expired, so that other manufacturing companies could also produce the drug other than the company that originally held the patent. The pharmacological effects of the generic drug was exactly the same as that of the original drug. Manufacturing conditions for generics are as stringent as for patented drugs. Generic drug names had to comply with strict international conditions regarding naming of the products. Counterfeit drugs, were not in any way linked to generics and were sub standard and/or falsified medical products. 

Trademarks and copy right registration protected various aspects of a product - this could include the shape of the container, the cap, material and instructions for medication etc. Trademarks generally were registered for 10 years and were renewable after that.

She highlighted some of the legal aspects regarding patents: 
-Patents were territorial and not international, so were only valid where they were registered (country or a region). Registering patents in many countries increased the costs thereof.
-SA did not belong to any of the patent organisations within Africa - ARIPO (African Regional IP organisation) or OAPI (IP organisation for francophone countries). There was however an international patent co-operation treaty in place that allowed for all patents to be registered on an international filing system
-Patents were one of the most valuable assets a company could have (e.g. Coca Cola recipe) but would also invoke fierce debate regarding its innovation or novelty (was it new or just an improvement on an already existing product or process)
-Once a patent was granted to someone it give them exclusive rights in terms of the patent - e.g. no one else could manufacture or import a particular product in terms of the patent conditions.
-In terms of pharmaceutical operations a patent could be for an innovative product or process.
-Patents had some exclusions, e.g. not applicable to discoveries and scientific theories, mathematical methods, computer programmes, plant or animal varieties or any biological processes for the production of animals or plants. Diagnostic or therapeutic and surgical methods for treating humans and animals - eg. Dr Chris Barnard could not registered his ground breaking open heart surgery methodology as a patent.  
-In registering a patent there had to be clear proof of its novelty and the composition or process must not be known by others (e.g. experts in the field)

Lastly, Prof Ncube discussed some aspects of the Draft Intellectual Property Policy Bill, Phase I (2017), which seemed to provide more clarity on IP in SA.  She said that SA did not carry out exhaustive examinations of patents prior to its adjudication - the DTI’s Companies and Intellectual Property Commission (CIPC) conducted a formal process evaluating if all the necessary legal and procedural requirements were met but often did not have sufficient capacity to check the technical or scientific “innovation” of the patent. There was therefore a valid concern within the industry on this issue due to this lack of technical expertise within CIPC. In other jurisdictions like the USA and EU the patent offices had sufficient technical resources. 

The Chairperson thanked Prof Ncube for the presentation and asked Committee members for their inputs on the briefing.

Ms A Mfulo (ANC) wanted to know why the process to register a patent was so long and  complicated and how it related to the 20 year lifespan in terms of developing a new drug in the pharmaceutical industry.

Mr P Atkinson (DA) wanted more clarity on the vetting process when patents were lodged in the CIPC, e.g. who checks the authenticity of the application in technical terms (if for example there already exists a product when applying for a patent on it).

Mr S. Tleane (ANC) wanted to know why SA was not part of any of the IP organisations in Africa.

Mr A Cele (ANC) wanted to know if any local pharmaceutical companies were supplying counterfeit drugs

The Chairperson wanted to know if local pharmaceutical companies could use an international IP in SA. She also wanted clarity on the fine line between IP processes or patents that encouraged monopolistic tendencies vs. competition law that sought to level the business playing field - no market abuse.

Prof Ncube addressed the question raised by Ms Mfulo first. She said that in SA, patent registration was done by specialist patent attorneys. The process was not “that complicated” but due to the technical and legal requirements this was the best approach in SA (and globally).  Due to the skills and technical expertise of patent attorneys they generally did all the vetting and checking on the patent prior to its submission for registration. The cost for patent registration ranged from around R5000 to R100 000 or even more depending on the number of countries or regions  where the patent had to be registered.

Addressing Mr Atkinson’s query, Prof Ncube said that the vetting in the CIPC patent office was mainly to check regulatory compliance and that the checking on the novelty or innovation often happened elsewhere or in other ways - e.g. legal challenges to refute the claim of innovation or novelty, or prior work done by patent attorneys. Academic institutions like UCT could provide this service to the CIPC (vetting and checking of technical issues) as it had the necessary skills in place.

She did not know why SA was not a member of ARIPO (SA only has observer status). She suggested DTI or the Department of International Relations and Cooperation could provide an answer. She also said there was move afoot within the African Union (AU) to establish a new Pan African Body to regulate IP in Africa, spearheaded by South Africa and Nigeria - the continents biggest economies. She expected some resistance from ARIPO and OAPI

Prof Ncube said she was not aware of any counterfeit drugs in the country due to diligent monitoring and policing at borders and ports. There was a Counterfeit Drugs Act with strong regulations to counter illegal imports of counterfeits.

On the questions about international IP’s in SA and competition law vs. IP, she commented as follows. Competition Law ensured that no company abused the market, whilst IP laws protected the economic rights of an individual or company. The legislation was such that this protection could not result in market abuse. It was possible to import products into SA on an international IP but the usual international and domestic laws were applicable to ensure copy rights or IP laws were not infringed or any market exploitation was kept in check.

The Chairperson raised an aspect that the Committee encountered during the oversight visit to Aspen related to the issue above - procurement by Aspen of their own medicines under licence from the USA (normal supply base) vs. sourcing (cheaper) generics from India . She asked Prof Ncube for her comments on the issue. 

Prof Ncube said that from a Public Policy perspective the cheaper source of the drugs in question should trump the more expensive option, provided that the generic drug quality was correct and not sub standard.

The Chairperson expressed concern that large pharmaceutical companies were often more concerned with profitability than quality and accessibility at an affordable price. Was there any risk in using generics?

Prof Ncube replied that generic medicines were exactly the same as patented medicines. The quality control checks and processes were as stringent provided it was sourced from a credible supplier. The controls in place were no different to that for patented medicines.

Ms N Hlonyana (EFF) wanted to know if there was any local body that randomly checked medicines - a regulatory body. She also wanted to know why not more medicines were manufactured locally instead of importing 85% of our needs.

Prof Ncube responded that the Medicines Control Body should conduct (or conducted) random checks. Other checks were at the dispensing pharmacies (both state and private) where there was a check prior to issuing medicines. She said, another important aspect was that consumers had to do their own checking to ensure the medicines received were correct.

The Chairperson said that the state had influenced the industry to ensure more local manufacturing - she cited the example of the HIV tender that specifically favoured local production vs. more imports. She also was concerned that some medical aids were not supporting local manufacturers but rather favoured large international drug companies. 

Mr Tleane wanted to know what the appetite was at university or tertiary institute, for young people to get involved in the pharmaceutical industry so that the knowledge base of the industry was expanded.

Prof Ncube said that as far as she was concerned there was substantial interest at  UCT and other institutions. There were discoveries of new drugs and ways had to be found to ensure local manufacture of these.  

The Chairperson closed the session by thanking Prof Ncube for her valuable input and the members for their discussions. She said the policy debate on the issue (IP) was ongoing.
The meeting was adjourned at about 11h40.



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