Facets of Technology Transfer: A Perspective of Pharmaceutical Industry

Transcription

1 Journal of Intellectual Property Rights Vol 13, January 2008, pp Facets of Technology Transfer: A Perspective of Pharmaceutical Industry Manthan D Janodia, D Sreedhar, Virendra S Ligade, Ajay Pise, Udupa N Department of Pharmacy Management, Manipal College of Pharmaceutical Sciences, Manipal University, Manipal Received 7 August 2007, revised 16 November 2007 Intellectual property is an important aspect for country s technological, economical and social development. It is observed that normally technologies are created in developed countries and benefits of these technologies are not spilled over to people in the developing countries. It is essential to make these technologies easily and economically available to people in developing countries. Technology transfer is thus an important aspect in making these technologies available to developing countries. By transferring technologies, firms can recoup a substantial portion of investment. Government, industry and academia can join hands in developing and distributing technologies to all the stakeholders. Licensing (in-licensing and out-licensing) is one such phenomenon of technology transfer that has gained momentum in pharmaceutical industry whereby pharma companies can contribute to research and development. This article identifies some aspects of technology transfer that is shaping pharmaceutical industry and its research and development activities to meet the newer challenges and some relevant examples of technology transfer in pharmaceutical industry. Keywords: Technology transfer, intellectual property, technology development, research and development, licensing One of the important aspects of development of a country is through social, technological and economic progress. It is argued that intellectual property is one such method by which countries can progress. But not every country has the capacity to create intellectual property that would help to achieve their socio techno economic development. Some firms and countries are major creators of intellectual property and some are major absorbers. Quite often it is observed that developed countries and firms in these countries are major developers of intellectual property where as developing countries and firms in these countries are major absorbers of technology. Research and Development (R&D) plays a vital role in creating these technologies. But not always benefits or R&D are transferred to the needy people and therefore the need of technology transfer arises. There are several aspects of technology transfer where pharmaceutical industry, academia, research institutions and government labs can contribute in disseminating the knowledge and know-how and develop new medicines or improve existing therapies. Licensing is one such aspect of technology transfer which is gaining prominence among pharmaceutical companies. Technology Transfer Technology transfer is defined as process by which a developer of technology makes its technology Corresponding author: manthan.j@manipal.edu available to a commercial partner that will exploit the technology. 1 Technology transfer can also be defined as a broad set of processes covering flows of knowhow, experience and equipment for mitigating and adapting to climate change amongst different stakeholders such as governments, private sector entities, financial institutions, non-governmental organizations (NGOs) and research/education institutions. 2 Technology transfer is important in extending benefits of R&D to the society at large especially in developing countries. Research is carried out in laboratories on an experimental scale before it could be produced for commercial use. Technology transfer is important for such research to materialize on a larger scale for commercialization especially in the case of developing and underdeveloped countries. It should also be seen that this technology is available to the needy countries easily and without undue hassles. Sometimes firms in developing countries are not able to absorb this technology due to constraints. Sometimes developer of technology is not interested in furtherance of this technology due to various constraints, such as, financial, technical, regulatory, distribution or related to production. According to the Commission on Intellectual Property Rights 3, there are several determinants of technology transfer. These determinants include ability of developing countries to absorb technology elsewhere and adapt it for own

2 JANODIA et al.: FACETS OF TECHNOLOGY TRANSFER: PERSPECTIVE OF PHARMA INDUSTRY 29 purposes, development of local capacity through education, R&D and development of institutions to facilitate technology transfer. It is also argued that transfer of technology is hindered due to high cost of development and rapid obsolescence. 4 It is very important to understand that these constraints should not act as barriers for transfer of technology from creator to absorber. Centi and Rubio 5 states that in developing countries human capital is low and technologies are so poor that they cannot invest in R&D, thus they may benefit from technology transfer. It is true that developing countries would benefit from technology transfer but the argument that human capital is low and technologies are poor in developing countries is flawed. Example of developing countries like India, China and Brazil are a testimony that developing countries have sound technological capabilities as well as enough human capital to contribute to their economic development. Technology transfer is predominantly dependant on contracts for the sale of technology and on licensing agreements (i.e. contracts to licence patents) rather than patents. 6 Still it is difficult to test link between strong patent regimes and technology transfer. 7 Transfer of technology is a situation, which creates a win-win situation for both developer and absorber of technology. TRIPS need to make some arrangement on technology transfer from developed countries to developing countries, and finally to build up the innovative capacity of developing countries. 8 Pharmaceutical industry is constantly looking for reducing cost of drug discovery and development. Technology transfer provides an opportunity to reduce cost on drug discovery and development. If a pharmaceutical company sells or buys a technology (out-licensing and in-licensing, respectively) at certain stage of drug development, it is likely to help pharma companies. Pharmaceutical companies are constantly looking for integrating technologies to screen and identify potential molecules. With biotechnology industry making rapid strides, pharmaceutical companies constantly seek to leverage advantage of biotechnology industry in drug discovery. Many small biotechnology firms do not have enough financial capability to develop the discovered technology. With focus of pharmaceuticals on biotechnology as well, major pharmaceutical companies can easily absorb technology from these small biotechnology firms and develop the molecule. Company like Wockhardt in India has focused on biotechnology as well other than core area of pharmaceuticals as a major growth driver. Such companies can easily integrate and facilitate technology transfer in biotechnology and pharma. With many pharmaceutical companies having very less or a few new molecules in the pipeline, are looking biotechnology as a major opportunity. But companies, having no expertise in biotechnology have to tread carefully as failure to take advantage in biotechnology research would cost them dearly in terms of finance. Technology Development Barton 9 in his paper has classified two major ways of developing a technology. These two major ways are: (i) Publicly developed technology and (ii) Privately developed technology. Barton states that in developed countries, public sector supports research in a variety of ways and is generally for basic research, which is usually supported by funding from government. Governments in certain developing countries such as China and India are taking lead in establishing national research laboratories. Barton adds that public - private partnership is another method of funding for research and ultimately transfer of technology. Even in most sophisticated developing countries there is generally relatively less private sector research. 10 There is a wide disparity in the development of technology in the developed and developing countries. In many developed countries, the technology is developed at university level, which is then transferred to the private sector whereas in developing countries this trend is an exception rather than a rule. Thus, developing countries are required to take more proactive steps in accelerating the pace of technology development at university level, which then could be taken up by private sector. It is said that developing countries must also encourage internal technology transfer. 11 Thus, technology development is an initial step for transfer of technology. Role of universities can also have profound impact on development of technology. Universities disseminate knowledge by publications but commercial use of that knowledge is restricted by patenting activities of companies to whom these universities grant licenses. 12 Technology development in pharmaceutical industry is a major challenge. Development of technology in pharmaceutical field is tedious, cumbersome, costly and risky process. It takes around

3 30 J INTELLEC PROP RIGHTS, JANUARY years and around US $1 billion for one drug to get marketed. Further, the risk involved is also high as only a few molecules from thousands of molecules that are screened preliminary for its potential action are successful in getting marketing approval from the regulatory agency in the US. Thus, major pharmaceutical companies look for technology transfer opportunities as it reduces the risk, cost and rate of failure. Many major pharmaceutical companies in the US and Europe are trying to synchronize research activity through technology transfer. Academia is where the basic research is carried out, but due to financial constraints, academia cannot develop technology and one of the options is to transfer basic technology to company that is interested in developing it further. Facets of Technology Transfer The transfer of technology could happen in any of the following ways: (a) Government labs to private sector firms (b) Between private sector firms of the same country (c) Between private sector firms of different countries (d) From academia to private sector firms (e) Academia, government and industry collaborations Government Labs to Private Sector Firms The government labs are important domain for intellectual pursuits. With funds available from government, it is very important that the technology developed by government labs reaches the masses and fostering of collaborations between the government and private sector firms is an important aspect of technology transfer. Here, government labs are technology developers whereas the private sector firms are technology absorbers. The main advantage of this type of technology transfer is that the government labs would get additional financial support and inflow of funds to the institutions funded by government would reduce the economic burden on governments. On the other hand, the private sector firm would gain access to technology at a relatively lower cost and would be in a position to make the technology available to masses. In India, data from the Department of Biotechnology 13 shows that during the year , overall 14 technologies were launched/transferred to private companies for commercialization. Between Private Sector Firms of the Same Country This is an important activity as the intellectual capital developed retains within the country. Transfer of technology by one firm (developer) to other (absorber) in the same country may be due to several reasons: (i) inability to commercialize technology, (ii) financial constraints, (iii) inadequate knowledge of regulatory requirements, (iv) constraints in distribution network, and (v) lack of sufficient human resources, etc. In this case, the developer of technology would get the payment from the absorber of technology that would eventually be pumped to build R&D capacity of the developer. This trend would be generally seen when a company is relatively small and is in its development stage. Once the company acquires enough financial resources the developer of technology, may gradually become absorber of technology. Between Private Sector Firms of Different Countries In this, technology diffuses from one country to another country. This way of technology transfer is particularly beneficial to developing countries or countries that are in transition phase towards development. The economical impact of transfer of technology to developing countries needs to be assessed before such technology transfer takes place. The long-term benefit of such technology transfer would help both developer as well as absorber of technology. The developer of technology would get the incentives to develop further technologies whereas the absorber would have access to technology unavailable in its own country. The absorber can commercialize the technology acquired for economic and social well being for citizens of the country. On the flip side it is stated that the technology seekers in developing countries face several hurdles when they are interested in commercial dealings with technology holders in developed countries. 14 In pharmaceutical sector, the amount that has to be paid to acquire is huge and many companies in developing countries cannot pay the royalty to technology developer to acquire technology. From Academia to Private Sector Firms This may be a difficult proposition in developing countries but it is generally observed that developed countries rely on academia to get the basic technology that can be further developed and commercialized. Academic centres that are actively involved in research can significantly contribute to the

4 JANODIA et al.: FACETS OF TECHNOLOGY TRANSFER: PERSPECTIVE OF PHARMA INDUSTRY 31 development of technology. These academic institutions can develop basic technology that can be absorbed by private firms. The advantage for private sector is that absorbing technology becomes economical for the private firms. This especially is true in case of pharmaceutical products where companies spend billion of dollars for drug discovery, which is high-risk proposition. Rather than spending this huge sum of money, companies can collaborate with academic institutions where companies can fund basic research and ultimately acquire the technology. According to Bayh Dole Act, in US, private industry can have access to university research with the help of licensing agreements. Here, academic patent holder can generate resources through technology transfer whereas industry gains access to university technology that is protected under patents. 15 Private firms can tie up with several academic institutions for wide array of research where each academic institution specializes in a specific technical area. Academia, Government and Industry Collaborations Academia, government and industry can have profound impact on technology transfer. Government can act as facilitator in developing technology by providing funds to academic institutions for development of technology. The technology developed by academic institutions can then be transferred to industry. This way, the government, academic institutions and industry would benefit by synergy of their capabilities. Editor of Current Science, P Balram, in his editorial 16 has stated Universities and public institutions can benefit from a spread of culture of patenting their research outcomes, if they become partners with industry. The case of Bayh Dole Act in US is an example of how universities and academic institutions can contribute to transfer of technology to industry through licensing agreements with the help of government funds. The Act was intended to create a uniform mechanism to promote the utilization and marketing of inventions developed under federally supported research and development projects by nonprofit organizations and small business firms. As non-profits, Bayh-Dole gives universities the right to retain title and exclusively license federally funded inventions, in return for which they must file for patent protection within a year of disclosure and collaborate with businesses to promote timely commercial application of the inventions they elect to own. 17 This clearly emphasizes the need for multifaceted, multipronged approach to development of technologies and later transfer of these developed technologies. This is more so in the case of developing countries that are major absorbers of newer technologies. Countries like India are capable of developing technologies that can now be transferred to developed world, as India is known for its scientific prowess. Indian scientific community is heralded for its scientific intelligence and Indian universities and government funded research organizations produce world-class research. 18 In pharmaceutical sector, academia, government and industry collaborations would be beneficial as academia can look for funding from government/government agencies to develop and design basic technology which could be transferred to industry for further development and in turn industry can extend financial support to the academic institution/university. In US, after the Bayh Dole Act, the research activity increased in academic institutions/universities and many pharmaceutical companies have acquired basic knowledge from these academic institutions/universities. In India, most of the pharmaceutical companies were involved in applied research rather than basic research and very few pharmaceutical companies had collaborated with academic institutions/universities. The situation in India is not so encouraging. With increasing challenges in drug discovery and development, Indian pharmaceutical companies started collaborating with university/academia from where they acquire the basic technology. Technology Transfer in Pharmaceutical Industry Pharmaceutical industry is technology driven, research intensive, high-risk high-profit, tedious, cumbersome, and long process. The development of various therapies and medicines takes several years, billions of dollars and different phases where regulatory approval is mandatory before marketing any product. Many pharmaceutical firms do not have the capacity to develop and market molecules till the end stage and thus are interested in transferring technology to big pharmaceutical firms that have financial and manpower capacities. Multinational companies that have base in developed countries are frontrunner in creating and harnessing technology in pharmaceutical sector. This is ascribed to strong protection of intellectual property such as patents. Restrictions by developing countries concerning the patent system in the pharmaceutical field are usually based on series of factors: Product importation vs

5 32 J INTELLEC PROP RIGHTS, JANUARY 2008 industrialization, prices of medicines and R&D and the release of new products by domestic companies. 19 Technology transfer in pharmaceuticals has been viewed from the perspective of innovation and R&D. In India, earlier transfer of technology activity was relatively less, which is due to relatively weaker patent protection that protected only processes and not products. 20 Although, diffusion of technology from developed countries was prohibitive due to patent protection, Indian Patents Act of 1970 helped Indian pharmaceutical companies to reverse engineer the technology and make use for the domestic market. This helped Indian pharmaceutical companies to develop their technological capacities and become research driven companies. In a healthy trend, many big Indian pharmaceutical companies are looking for creating technologies by investing in R&D and protecting their intellectual assets such as patents. It is identified that the technological capabilities of Indian companies have grown to such an extent that MNC pharmaceutical companies have started realizing potential of Indian companies technological capabilities. In mid 1990s, Eli Lilly established a joint venture with Ranbaxy to develop cost effective process for synthesis of Cefaclor. Similarly, Bayer had a contract with Ranbaxy to develop once a day formulation of its patented molecule Ciprofloxacin. 21 Methods of Technology Transfer Technology transfer can be in various ways such as know-how delivery, contract research and development, establishing joint ventures, setting up plants, establishing production processes, quality control procedures, etc. on a turnkey basis, and licensing patents, designs and other forms of IPR. 22 Technology requirements of developing countries and third world countries can be facilitated through licensing contracts or technology transfer. Licensing is probably the most common method of technology transfer and concerns granting of a right or license to use the technology in return for agreed payments, usually a royalty linked to sales volume or value. 23 Two main strategies of licensing are gaining prominence nowadays in several industries including pharmaceuticals. These two strategies are licensing-in and licensing-out. In licensing-in strategy, companies that are small and lack facilities to do basic research would wish to buy others research. Companies that are big and are research based would also like to license in technology to expand its product line. For example, since no Japanese pharmaceutical companies are in apposition to sell directly in Europe or the US, Japanese companies have been an important source of license projects. In case of licensing-out strategy, rights of companies are given to another party. Large companies normally do not resort to licensing-out technology except for the project that is of little value or importance whereas small companies have only patents as their assets and cash is scarce. In such a situation they would like to license out. Licensing-in and licensing-out are two different sides of the same coin and differ only how it is perceived i.e. whether party is licensee or licensor. 24 For example, Ranbaxy, India s one of the leading pharmaceutical companies is involved in both in-licensing and out-licensing activity. Ranbaxy is looking for in-licensing opportunities for Novel Drug Delivery Systems (NDDS), Value Added Generics, Branded Generics and Generics in Developed, Emerging and Developing markets. On the other hand, Ranbaxy is looking for out-licensing opportunities in therapeutic categories such as urology, respiratory and anti infectives. 25 Other Indian pharma companies like Wockhardt Ltd, Cipla Ltd, Torrent Pharmaceuticals Ltd, Dr Reddy s Laboratories Ltd, Nicholas Piramal India Ltd, Elder Pharmaceuticals Ltd and USV Ltd have already signed in-licensing agreements with foreign drug makers. 26 Technology transfer can also be in the form of turnkey agreements where technology being sought is not specific and covers whole production complex. A joint venture involves an association of persons for a joint undertaking in which the parties contribute in different ways, such as through provision of working capital and money, patent rights, technology and marketing skills. 23 Few Cases of Technology Transfer The process of technology transfer is actively pursued in India through government laboratories, academic institutions, and commercial entities such as companies. Government institutions and laboratories are the frontrunner in creating, harnessing and transferring the technology. The Bhabha Atomic Research Centre (BARC) has developed and transferred around 90 technologies in the areas, such as, environment and health; electronics, electrical and mechanical; chemical and metallurgy; radioisotope and applications. Several technologies are still available for transfer. The National Chemical Laboratory (NCL), Pune, has several linkages with universities and pharmaceutical industry to ensure

6 JANODIA et al.: FACETS OF TECHNOLOGY TRANSFER: PERSPECTIVE OF PHARMA INDUSTRY 33 successful scale up, seamless technology transfer and implementation of technology. The Department of Biotechnology (DBT) has successfully transferred some technologies of forest trees through tissue culture. In the area of plant biotechnology, technology for teak is successfully transferred to International Plants Laboratories, UK. The transfer includes knowhow and training. DBT claims that this is the first reverse transfer of tissue culture technology from developing country to a developed country. The Micropropagation Technology Parks (MTP) established by DBT has successfully transferred the technology of three species Eucalyptus, Populous and Sugarcane to Cadila Pharmaceuticals, Ahmedabad. The pharmaceutical company like Cipla has technology transfer agreements with companies in Uganda, Nigeria, Egypt, Morocco, and Algeria.. Sun Pharmaceuticals Ltd acquired loss making Caraco Pharmaceuticals Laboratories in US and structured technology transfer agreement and Caraco now has several markets in US with increase in the sales. Shantha biotechnics had entered into technology transfer agreement for typhoid vaccines with IVI, Korea. Industrial Research and Consultancy Centre (IRCC), in Indian Institute of Technology (IIT), Mumbai, has developed several technologies, primarily in the area of engineering, that are either transferred or are available for transfer. Recently, Themis Laboratories has entered into technology transfer agreement with Aventis Pharma Ltd for the development of fixed dose combinations of glibenclamide and glimepiride with metformin, a technology patented by Themis. 27 The US multinational Eli Lilly had entered into a technology transfer agreement with Shasun Chemical & Drugs for the manufacturing know-how of the anti-tb drug, cycloserine, produced by Shasun to meet Eli-Lilly s global requirements of the drug. 28 Conclusion Technology transfer agreements between developed and developing countries are useful for making technologies available to people in developing countries easily and economically. Technology transfer agreements can benefit universities and industry with government acting as facilitator. Thus, a comprehensive technology transfer policy by universities, industry and government would act as a boost in making technologies available expeditiously. In case of pharmaceutical products, that require billions of dollars to come out with a new molecule in several years, pharmaceutical companies can benefit by collaborating with academic institutions that provide basic research, which could further be taken by these industries. This would create a win win situation for industry and academia and governments objective of providing healthcare to their citizens is achieved. 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