E cdip/15/inf/2 original: english date: january 8, 2015 Committee on Development and Intellectual Property (cdip) Fifteenth Session Geneva, April 20 to 24, 2015

		E
CDIP/15/INF/2
ORIGINAL: ENGLISH
DATE: january 8, 2015

Committee on Development and Intellectual Property (CDIP)

Fifteenth Session

Geneva, April 20 to 24, 2015

Study on Pharmaceutical Patents in Chile

prepared by Ms. María José Abud Sittler, Researcher, Columbia University, United States of America, Mr. Christian Helmers, Assistant Professor, Department of Economics, Santa Clara University, United States of America, and Ms. Bronwyn Hall, Professor of Technology and the Economy, Department of Economics, University of California, Berkeley, United States of America¹
1 The Annex to this document contains a Study on Pharmaceutical Patents in Chile prepared under the Project on Intellectual Property and Socio-Economic Development (CDIP/5/7 Rev.) approved by the Committee on Development and Intellectual Property (CDIP) in its fifth session, held in April 2010.
2. The CDIP is invited to take note of the information contained in the Annex to this document.

[Annex follows]

I. Introduction

Historically, pharmaceutical patents are among the most controversially debated issues with regard to intellectual property (IP) protection, especially in developing countries. During the negotiations of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, pharmaceutical product patents represented one of the most divisive issues, being opposed by developing countries because of concerns that stronger patent protection would hinder access to drugs and prevent the development of a domestic pharmaceutical industry. The TRIPS agreement forced developing members of the WTO to grant patents with a statutory lifetime of 20-years from the patent application also to pharmaceutical compounds.² Almost two decades after TRIPS, the empirical evidence on its effect on developing countries is at best mixed (see Section 2 below).

Despite the strengthening of IP protection brought about by TRIPS, many developing countries continue to apply a more restrictive approach than developed countries to the granting of pharmaceutical patents. While TRIPS requires the availability of patent protection for processes as well as products in “all fields of technology” (TRIPS Article 27.1), the agreement provides countries with substantial freedom to define the standards of patentability.³ Some developing countries, most prominently India, have used this freedom to restrict the granting of so-called secondary pharmaceutical patents.⁴ As opposed to primary patents which protect directly an active ingredient, secondary patents protect a range of chemicals related to an active ingredient (such as crystalline forms of the original compound), methods of use, formulations, dosages, etc.).⁵ Other developing countries, such as Brazil and South Africa, are currently debating new legislation that would emulate India’s approach to restricting the patentability of secondary patents.⁶
In developing countries, secondary patents may have played particularly important a role for multinational originator companies during the years following the introduction of pharmaceutical patents. When developing countries began to allow the granting of pharmaceutical patents, in many instances originator companies were unable to obtain patent protection for drugs that had already been patented abroad. In Chile, for example, pharmaceutical patents were introduced in 1991, but pharmaceutical drugs that had been patented abroad before the 1991 law came into effect were expressly not patentable in Chile. This may have created strong incentives for originator companies to rely on new secondary patents instead.
The sparse, available evidence on secondary patents, which focuses on the U.S. and the European Union (EU) (see Section 3 below), offers some evidence on the use of secondary patents by originator companies. Empirical and anecdotal evidence suggests that pharmaceutical originator companies use secondary patents extensively in those markets. There is also some evidence that secondary patents can be used to extend patent protection on a given drug in length and breadth and it may create legal uncertainty over the scope of patent protection of a drug. That said, secondary patents can be used to protect genuine follow-on innovation, although distinguishing strategic use of secondary patents from their use to protect follow-on innovation is very difficult.
Despite the widespread use of secondary patents and the current contentious policy debate, there is little evidence on their effect in developing countries. We document the use of primary and secondary patent by multinational originator companies in Chile.
From a data point of view, studying this question is challenging because it requires not only a distinction between primary and secondary patents, but also a mapping of patents to active ingredients and the corresponding pharmaceutical products. Linking patents to active ingredients is an enormous challenge because there is usually no explicit mentioning in the patent claims of the active ingredient contained by a drug.⁷ We address this problem in three ways. First, we rely on the Orange Book of the U.S. Food and Drug Administration (USFDA) to identify U.S. patents on the compounds registered in Chile. We then construct patent families for these U.S. patents and verify whether there are any Chilean equivalents (regardless of whether the Chilean patent has been granted).⁸ Similarly, we undertake the same exercise using the Merck Index, which provides information on patents worldwide. Second, we use a dataset compiled by INAPI that contains the compound-patent mapping for all new compounds registered in Chile between 2005 and 2010. Third, we asked experts in pharmaceutical patents in Chile to match directly the remaining set of all granted Chilean patents to the complete list of drugs registered with the Chilean health authorities. This means that we matched all granted Chilean patents to drugs, either directly or through any of the other approaches. In contrast, applications that have not been granted (regardless of the reason) were only matched if they contained new compounds registered with the ISP between 2005 and 2010 or they matched via the Orange Book or Merck Index.
Because companies can obtain competitive advantage also through brand recognition, we also match the pharmaceutical product-level data with trademark data. The mapping of drugs and trademarks is more straightforward than that of drugs and patents. The trademark database contains trademarks classified by field of use such as pharmaceuticals, health, etc. The pharmaceutical product data provides the names under which drugs are marketed, which search for in the relevant classes in our trademark database.
For the matching of patents and trademarks, we rely on a dataset that contains the universe of patent and trademark applications filed with the Chilean Patent Registrar between 1991 and 2008 and with its successor, the Chilean patent office (INAPI) in 2009 and 2010. It includes all patent applications and trademark applications by domestic as well as foreign entities (see Abud et al., 2013). The pharmaceutical product data comes from the National Public Health institute (ISP). The institute maintains a database that links all registered drugs in Chile to the pharmaceutical compounds that they contain.⁹ The database also contains additional information on the drug (e.g. when it was registered), the owner of the drug, whether the drug is produced domestically or abroad. We use the bridge between compounds and drugs contained in ISP’s database to link patents and trademarks at the product-level. Patents are linked to active ingredients whereas trademarks are linked to drugs.

Our study contributes to the sparse empirical literature on the use of secondary patents, in particular by foreign multinationals. It offers in particular for the first time empirical evidence on the use of secondary patents in Chile.

The remainder of the paper is organized as follows. Section II briefly reviews the existing literature on the role of pharmaceutical patents on economic development. Section III discusses the distinction between primary and secondary patents and reviews the corresponding existing empirical evidence. Section IV provides background information in the relevant regulatory framework in Chile. Section V describes the data and Section VI our main results. Section VII offers a few concluding observations.