Political Legal, and Ethical Dilemmas in the Global

Pharmaceutical Industry

Presented by:
Arjun Bindra
Arpit Gilra
Prakhar Gupta
Sanmay Kothari
Case Summary

The global pharmaceutical industry currently faces the following issues:

• The high cost and years dedicated to Research and Development for new
medications.
• Limited protection for intellectual property rights especially in developing nations.
• Generic brands entering the market.
• Counterfeit drugs and internet-based pharmacies.
• Therapeutic Areas of Focus for pharmaceutical companies.
• Public Scrutiny to include governments.
 Q1 Specify the types of country risks that
pharmaceutical firms face in international business.
How do the political and legal systems of countries
affect the global pharmaceutical industry?
Specific types Counterfeit Drugs:

of country risks • Counterfeit drugs are a widespread epidemic. Usually,

counterfeit drugs are manufactured from India or
that China.

pharmaceutical
firms face in Limited Protection and Intellectual
international Property:
business • Developing countries are where pharmaceutical
countries face a big risk with intellectual property.
How do the Every country has a political and legal system that
is unique and different. This presents challenges
political and legal for the company’s strategy and preference, as an
systems of owner you must comply to business laws and
regulations.
countries affect the
global
pharmaceutical
industry?
 Q2 People need medications, but the poor often cannot afford them.
Governments may not provide subsidies for health care and medications.
Meanwhile, pharmaceutical firms focus their R&D on compounds likely to
provide the best returns. What is the proper role of the following groups in
addressing these dilemmas: national governments, branded pharmaceutical
firms, and generic manufacturers?
 Develop more protection on intellectual property in the
pharmaceutical industry. For example, increase the number of
years from 20.

Reduce trade barrier in this industry. This way there is more

National variety for the consumers and at a lower cost.
Governments
Investment capital: The government could invest in this
industry to cut down the cost of R and D.

Encourage more private initiatives such as the Bill and Melinda

gates Foundation to address this reality.
 An increase in the protection of intellectual property rights and
investment capital from the government will give pharmacies the
opportunity to save on the large amounts of money spent on
research and development and focus on making more drugs
available to the poorer countries at a lower price.
Branded
Pharmaceutical A reduction in the trade barriers of these poorer countries will
encourage pharmaceuticals to invest and make drugs easily
Firms accessible to these people without overthinking the high costs of
internationalization.

Pharmaceuticals can consider going into a joint venture with an

already existing company in order to share the profits and losses that
may occur in the process of inventing, manufacturing a particular
drug.
 Reduced trade barriers makes international
business easier for generic manufacturers as
they are able to sell drugs without any
restrictions, making access to these drugs by
Generic the poorer countries easy and hassle free.
Manufacturers
Through a joint venture, generic
manufacturers are able to benefit from
economies of scale i.e. lower cost of
production. This allows them to charge lower
amounts for these drugs.
 Q3 Consult www.phrma.org, the Pharmaceutical
Research and Manufacturers of America. What steps
is the branded industry taking to address the various
ethical issues it faces, such as providing affordable
drugs to poor countries?
 Steps taken to provide affordable drugs to poorer countries

Providing more information about health care out of pocket costs and quality available to patients.

Innovators are investing 20% of their revenues into R&D which allow companies to have the ability to develop new
drugs that are low-cost generic products.

Firms are changing their incentives in the supply chain so that more of the negotiated rebates and discounts are
used to lower costs for patients.

There were conversations about delinking supply-chain payments from the list prices of medicine.

Biopharmaceutical companies are working with insurers to come up with new payment plans for medicine that
focuses on results, lower out-of-pocket costs and enable patients to access the right treatments the first time.

The Let’s Talk About Cost campaign launched a television advertisement to generate more conversation about
solutions to the challenges patients face affording their medicines.
 Q4 Consult the TRIPS agreement at the WTO portal
(www.wto.org). What are the latest developments regarding
this treaty? What types of protection does this treaty provide
to pharmaceutical firms? What enforcement mechanisms does
TRIPS provide for ensuring that these protections will be
carried out?
Trade-Related Aspects of Intellectual Property Rights (TRIPS) and
the Pharmaceutical industry

• TRIPS is an agreement by the members of the World Trade Organization (WTO)

constructed to protect intellectual property rights.

•In 2005, proposed changes for patents and public health TRIPS became finalized. The new
changes revoked the barrier preventing nations from using compulsory licenses to
manufacture generic medication when needed for the benefit of public health. The limitation
on exportation of generic medication to developing nations was also lifted. This decision
assists nations without the production capacity to domestically produce needed medication.
TRIPS Patent Protection and Enforcement

• TRIPS states that patents on pharmaceutical products have a 20 year lifespan.

This allows the industry to recoup cost related to developing and manufacturing
the new product.

• TRIPS is the only international agreement that explicitly states enforcement

procedures for Intellectual Property rights infringement. It provides legal remedies
for judicial authorities to prescribe including injunctions, damages, and
destruction of the goods that have caused the infringement. Criminal Penalties are
only mandatory in willful trademark counterfeiting or copyright piracy on a
commercial scale.
 Q5 Recommend a strategy that management at a large
pharmaceutical firm should employ to reduce the likelihood of
political and legal risks that such firms face. What steps
should management take to minimize its exposure to such
risks?
 • Ensure that large pharmaceutical firms are knowledgeable
Strategies that about all the involved countries’ laws and regulations.
reduce political Allows the opportunity for firms to produce and distribute
medication that are compliant with each country.
and legal risk
• Ensure companies are not violating patents, and respect
large pharmaceutical intellectual property.

•The government needs to create a strict process to ensure

that the right drugs are distributed and helps patients treats
their diseases. There should also be a punishment system set
in place for carriers and suppliers who counterfeit drugs.