Bangladesh generic drug industry confronts Roche, Bird Flu

James Love
7 March 2006

Today I’m in Dhaka, Bangladesh, and have just heard a report about the Bangladesh domestic pharmaceutical sector. For 2005, the domestic firms claim that a startlingly 97 percent of pharmaceutical consumption was manufactured domestically, and that the multinational company share of the Bangladesh market (imported or manufactured domestically) was only 7 percent.

The Bangladesh pharmaceutical industry is growing at 12 percent annually. The size of the domestic market is about $.5 (USD) billion annually. In recent years the domestic firms have hired a number of engineers and scientists from India, and they are increasing their capacity to manufacture Active Pharmaceutical Ingredients (APIs).

The leading export pharmaceutical company from Bangladesh, Beximco, will likely announce next week that will be selling oseltamivir phosphate, a generic version of the drug, sold by Roche as Tamiflu, that is a treatment for a possible avian flu pandemic.

Beximco first wanted to purchase APIs from Hetro, an India generic firm. But when Hetro entered into negotiations with Roche to be an authorized supplier of generic oseltamivir, it was saddled with restrictive conditions on the sale of the product. Those restrictions would have been extended to Beximco also. Beximco would have been required to exclusively purchase APIs from Hetro, and Beximco would only be allowed to sell to the Bangladesh government, and not to the private sector, or to any other government.

Hetro sought to set its price for oseltamivir APIs based upon an index of the market prices for oseltamivir APIs by competitors. But it also asked for an additional 8 percent royalty for the sale of finished products. Beximco would also have been required to warrant that it would not infringe or violate any intellectual property rights of Roche or Gilead, which might be interpreted as a restriction on seeking a compulsory license or disputing a patent claim.

If the Hetro conditions are requirements imposed by Gilead/Roche, they would seem to raise antitrust concerns. Roche would appear to be seeking to leverage its monopoly position in countries where it has patents, to influence the market for generic APIs and finished products in countries where it does not have patents, and to reduce the possibility of non-controlled/affiliated Roche suppliers competing with Roche in markets where Roche controls the patent (as a generic supplier operating under a government use or compulsory license non-voluntary authorization to use a patent) or where there is no patent.

Moreover, the conditions imposed by Hetro clearly serve to reduce the global supply of generic oseltamivir, at a time when the world is facing a possible global avian flu pandemic, and Roche is unable to meet orders for government stockpiles, and is charging hefty prices that discourage both public and private stockpiling of the medicine.

Beximco rejected the Roche/Hetro restrictions, and will be selling without a license from Roche. It will be buying APIs from CIPLA (another India generica firm) for now, but it plans to manufacture its own APIs for oseltamivir later.

As the domestic Bangladesh pharmaceutical industry is taking off, there has been a flurry of patent applications in Bangladesh. Bangladesh, which only became independent in 1971, has had a domestic patent law dating back to 1911 (the colonial act), which includes product patents. But until recently, few patents were filed in Bangladesh. But now that India’s patent law has been changed, companies are seeing Bangladesh as the new India, and they are filing patents here in significant numbers.

The domestic industry here sees its LDC status as a strategic advantage. Bangladesh could amend its domestic patent law to eliminate patents on pharmaceutical products, until at least 2016, and it can freely export medicines without worrying about the WTO’s complex 30 August 2003 decision. Bangladesh apparently cannot lose its LDC status until 2012 at earliest, because its per capita income is considerably below the UN threshold for LDCs.

The problems Bangladesh faces are twofold. First, the government has not been able to change its own patent law to take advantage of (paragraphs 4,5, and 7) the Doha Declaration on TRIPS and Public Health. Second, the domestic firms need a more professional and widely respected regulatory mechanism. Apparently they could support something through user fees. They want something that has independence, and competence. They are not sure how to get something like this off the ground here, and are asking for advice.