Chile, Don’t Let Compulsory Licensing Restrict Pharmaceutical Market Potential

Chile is an important market within Latin America for many industries, including the innovative biopharmaceutical sector. However, experts behind a recent risk/rewards analysis warn that the threat of compulsory licensing and a weak regulatory environment could bring Chile’s positive momentum to a grinding halt.

Behind these findings was BMI Research and Fitch Solutions’ updated Innovative Pharmaceuticals Risk/Reward Index (RRI). The RRI assesses the ability of pharmaceutical innovators to do business in a country based on industry-specific opportunities and limitations – including intellectual property laws, regulatory and legal frameworks, market access certainty, political and economic stability, and industry investment. RRI scores are out of 100 points, with higher scores indicating a more positive innovation environment.

Findings show that, although Latin America is gradually becoming a more influential pharmaceutical innovator, the region is far behind the rest of the world:

  • Latin America (44.8) scored worse than most other regions, including North America (82.2), Europe (60.1), Asia (53.6) and the Middle East (49.8).
  • Chile (66.9), Brazil (64.4) and Mexico (61.7) lead the Latin America region, while Venezuela (15.5), Honduras (25.0) and El Salvador (29.8) are below par.
  • Chile has been a source of stability in the otherwise risky Latin America region. With a RRI score of 66.9, Chile is closing in on other rapidly expanding markets such as Canada (77.2) and China (72.0).

RRI scores are key measures of innovative pharmaceutical market potential. For instance, if sufficient rewards don’t exist in a country, investment and clinical trials decline, companies and jobs drift elsewhere, and innovative medicines don’t reach the patients that need them. Simply put, potential rewards must exist to incentivize the enormous risk inherent to discovering and developing a lifesaving cure.

Rather than pursue compulsory licensing, Chile’s government should look to other solutions that reliably protect intellectual property rights and incentivize investment and entrepreneurship.

Consider that, even in the innovation-friendly environment of the United States, developing a new medicine takes between 10 to 15 years and costs $2.6 billion, on average. And, notwithstanding that enormous time and financial investment, less than 12 percent of candidate medicines that make it into Phase 1 clinical trials will be approved by the Food and Drug Administration (FDA).

While taking the plunge into drug discovery and development is already a tremendous gamble, it’s made significantly more risky based on where an inventor is located. In the United States, which scored 87.2 on the RRI, an inventor can reliably expect a reward for a breakthrough treatment or cure – whether that be patent protection, market access, and/or fair pricing to recover the R&D investment. However, that reward is much less reliable in Latin America, where legal and regulatory frameworks, protections for intellectual property, and political and economic certainty are often lacking.

Fortunately, Chile represents a promising outlook for the region. According to a recent study, Chile leads the Latin America region in clinical trials per capita, at 71.4 clinical trials per million population in 2016. However, Chile’s weak intellectual property protections – such as insufficient assurance of patent rights and poor regulatory data protection – threaten their pharmaceutical market potential. Perhaps most concerning is a bill directing the use of compulsory licenses that was passed by Chile’s Congress in 2017.

Investors and innovators are taking note of this hasty action in Santiago, but it’s not too late for Chile. Rather than continue pursuing compulsory licensing, Chile’s government should look to other solutions that reliably protect intellectual property rights and incentivize investment and entrepreneurship.

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