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BigPharma - before, during and after COVID-19

BigPharma - before, during and after COVID-19

05.05.2020
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Quite a significant part of the session's discussion on April 30 revolved around the topic of BigPharma. Participants have raised many important points regarding the activities of the BigPharma in the market; current and potential regulations that should be applied; as well as the change in the situation in the pharmaceutical markets caused by the COVID-19 pandemic. 


Serik Zhumangarin, a member of the board for competition and antitrust regulation of the Eurasian Economic Commission, has started the discussion by speaking extensively about the situation as a whole and regulation in the pharmaceutical market. He noted that there are strong effects of patent-based monopolies in the pharmaceutical markets. Although his specific issue has been discussed many times before, it does not lose its relevance. Nowadays, the substantial part of the innovation and research in the market is carried out by the small start-ups and companies, that are being bought up by the larger companies, which increases the concentration in the pharmaceutical market. Mr Zhumangarin noted that there are potential advantages and disadvantages to this situation. Big companies can afford to carry out proper pre-clinical and clinical trials on a large scale, which allows for better research of the qualities of the product, and benefits consumer; they can organise proper distribution; develop better commercialisation of the product; and make it more available to more consumers. However, large companies often misuse their market power and size, which leads to high entry barriers in the market. The long term patents often lead to the high prices which make the product unavailable to most consumers, and can only be afforded through government programmes. It creates a too large focus on commercialisation in individual spheres while killing off the competitive projects developed by smaller companies that could decrease the profits through competition, or are not as profitable as current projects. All of this essentially leads to a situation that Serik Zhumangarin described as: - "taking away peoples right to life due to lack of money".


Veljko Milutinovic, the director of the Balkan Dialog Research Center and ex-commissioner of the Serbia Competition Commission has recalled an example from recent American history. After the SARS and MERS epidemics, the US government in 2016 decided to develop cheaper and more efficient forms of mechanical ventilation devices. Such a device was being developed by a start-up - Newport, which found it possible to reduce the price significantly. A little later, the start-up was bought by the monopolist - a big medical company, Covidien, and very soon the project to develop a cheap ventilator was frozen and 'shelved', disappearing from the market. Such occurrences are not rare, and 'killer acquisitions' indeed pose a formidable challenge in the field of the antitrust regulation in pharmaceutical markets. Of course, the 'BigPharm' in its business practice is devoid of incentives to combat epidemics, but, according to Veiko, this is more a matter of contract control by the US government. Mr Milutinovic noted: -"If we were talking about the military-industrial complex, such a situation would be unthinkable".


According to Mr Zhumanngarin, the answer to the question lies in finding a balance between IP law and antitrust law. He shared the experience of the Kazakh policymakers that could be amongst potential solutions to the problem. In Kazakhstan, it is possible to go to court to request a compulsory licensing of a patent-protected product, that has not been in continuous use for any three years of the patent period. This policy could be a very efficient tool preventing large companies from carrying out killer acquisitions with the intent of 'shelving' innovative products in an attempt to limit competition and retain current profits.


The discussion was continued further by another researcher from BRICS Law and Competition Policy Centre, professor at the University of Stockholm – Bjorn Lundqvist. His presentation has covered a variety of points regarding intellectual property and regulation in the pharmaceutical market. He talked extensively about big companies buying up new technologies from start-ups in the market and thus preventing the development of possible competitors at an early stage, stating that, unfortunately, the developers of innovative products in small start-ups and universities were often: - "good researchers, but bad businessman". His presentation benefitted from an academic, in-depth understanding and analysis of the regulations on R&D and collaboration in the US and EU markets. 


Antitrust regulation in the pharmaceutical market has always been a 'hot topic' for discussion and debates. It is not a surprise that it has become all the more relevant during the times of the pandemic. As has been noted many times during the session's discussion, this is an important sector that requires close attention and tailor-made approaches in many cases. The challenges presented to us during the pandemic have revealed the shortcomings of the antitrust regulation in the pharmaceutical sphere. They have underlined the importance of developing efficient 'rules of the game' aimed at preventing the stalling of innovation in the market.