Harvard Case - Real Blue? Viagra and Intellectual Property Rights Law in China
"Real Blue? Viagra and Intellectual Property Rights Law in China" Harvard business case study is written by Regina Abrami, Tracy Yuen Manty. It deals with the challenges in the field of Business & Government Relations. The case study is 25 page(s) long and it was first published on : Feb 17, 2010
At Fern Fort University, we recommend Pfizer implement a multi-pronged strategy to protect its intellectual property (IP) rights in China while navigating the complex legal and political landscape. This strategy should focus on building strong relationships with the Chinese government, leveraging international trade agreements, and proactively enforcing its patents.
2. Background
This case study examines Pfizer's struggle to protect its patent for Viagra in China. Despite holding a valid patent, Pfizer faced numerous challenges, including counterfeiting, parallel imports, and a lack of enforcement mechanisms. The case highlights the complexities of protecting IP rights in emerging markets, particularly in China, where a rapidly developing economy often clashes with established international norms.
The main protagonists are Pfizer, a multinational pharmaceutical giant, and the Chinese government, which plays a crucial role in shaping the legal and regulatory environment for IP protection. The case also features various stakeholders, including counterfeiters, parallel importers, and Chinese consumers seeking affordable access to essential medications.
3. Analysis of the Case Study
Framework: This case study can be analyzed using the framework of Competitive Advantage as it explores how Pfizer can maintain its market dominance in the face of competition from counterfeiters and parallel importers.
Key Issues:
- Weak IP Protection: China's legal framework for IP protection was relatively weak at the time, making it difficult for Pfizer to enforce its patent rights.
- Lack of Enforcement Mechanisms: The Chinese government lacked effective enforcement mechanisms to deter counterfeiters and parallel importers.
- Political and Economic Pressures: The Chinese government faced pressure to balance IP protection with the need to provide affordable access to essential medicines for its population.
- Globalization and Trade Policies: The increasing globalization of trade and the rise of emerging markets like China created new challenges for multinational companies like Pfizer in protecting their IP rights.
Analysis:
- Competitive Landscape: Pfizer faced intense competition from counterfeiters and parallel importers, who were able to undercut its prices by producing and importing generic versions of Viagra. This competitive landscape eroded Pfizer's market share and profits.
- Government Policy and Regulation: The Chinese government's approach to IP protection was evolving, with a growing emphasis on strengthening enforcement mechanisms. However, the government also faced internal pressures to balance IP protection with the need to provide affordable healthcare for its population.
- International Business and Trade: The case highlights the complex interplay between international trade agreements and national laws in protecting IP rights. While China had signed international agreements on IP protection, its domestic implementation and enforcement were still lagging behind.
4. Recommendations
- Strengthen Government Relations: Pfizer should engage in business and government relations by building strong relationships with key government officials in China. This includes:
- Lobbying Strategies: Actively participate in lobbying strategies to advocate for stronger IP protection laws and more effective enforcement mechanisms.
- Corporate Political Activity: Engage in corporate political activity to influence government policy decisions related to IP protection.
- Public-Private Partnerships: Explore opportunities for public-private partnerships with the Chinese government to develop joint initiatives for IP protection and enforcement.
- Leverage International Trade Agreements: Pfizer should leverage its participation in international trade agreements, such as the WTO, to strengthen its legal position in China. This includes:
- Trade Policies: Advocate for stronger IP protection provisions in trade policies negotiated between China and other countries.
- International Relations: Utilize its network of international relationships to exert pressure on the Chinese government to uphold its international obligations on IP protection.
- Proactive Enforcement: Pfizer should proactively enforce its patents in China by:
- Legal Action: Initiating legal action against counterfeiters and parallel importers.
- Collaboration with Law Enforcement: Working closely with Chinese law enforcement agencies to identify and prosecute violators.
- Brand Protection: Implementing robust brand protection strategies to prevent counterfeiting and parallel imports.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: Pfizer's core competency lies in research and development, and its mission is to develop innovative medicines that improve human health. Protecting its IP rights is essential for maintaining its competitive advantage and fulfilling its mission.
- External Customers and Internal Clients: Protecting its IP rights ensures that Pfizer can continue to provide its customers with high-quality, safe, and effective medicines. It also protects the interests of Pfizer's internal stakeholders, including employees, shareholders, and investors.
- Competitors: Pfizer's competitors include both legitimate pharmaceutical companies and counterfeiters. By proactively enforcing its patents, Pfizer can deter counterfeiters and maintain its market share.
- Attractiveness ' Quantitative Measures: Protecting its IP rights can lead to increased revenue, market share, and profitability for Pfizer.
- Assumptions: These recommendations assume that the Chinese government will continue to strengthen its IP protection framework and that Pfizer will be able to effectively leverage its resources and relationships to enforce its patents.
6. Conclusion
Pfizer's experience in China highlights the challenges of protecting IP rights in emerging markets. While the Chinese government has made significant progress in strengthening its IP protection framework, more needs to be done to ensure effective enforcement and deter counterfeiting. By implementing a multi-pronged strategy that combines government relations, international trade agreements, and proactive enforcement, Pfizer can effectively protect its IP rights in China and maintain its competitive advantage in the global pharmaceutical market.
7. Discussion
Alternatives:
- Abandoning the Chinese Market: Pfizer could choose to abandon the Chinese market altogether, but this would result in a significant loss of revenue and market share.
- Focusing on Low-Cost Generic Production: Pfizer could choose to focus on producing and selling low-cost generic versions of Viagra in China, but this would undermine its brand image and potentially damage its reputation.
Risks and Key Assumptions:
- Political Risk: The Chinese government's IP protection policies could change, potentially making it more difficult for Pfizer to enforce its patents.
- Enforcement Challenges: Despite efforts to strengthen enforcement mechanisms, counterfeiters and parallel importers may continue to operate with impunity.
- Market Dynamics: The Chinese pharmaceutical market is rapidly evolving, and Pfizer may face new challenges from emerging domestic competitors.
Options Grid:
| Option | Benefits | Risks |
|---|---|---|
| Strengthen Government Relations | Improved IP protection, increased market access | Political risk, potential for corruption |
| Leverage International Trade Agreements | Stronger legal position, increased pressure on Chinese government | Limited enforcement mechanisms, potential for trade disputes |
| Proactive Enforcement | Deter counterfeiters, protect market share | High legal costs, potential for backlash from Chinese government |
| Abandon the Chinese Market | Reduced risk, focus on other markets | Loss of revenue and market share |
| Focus on Low-Cost Generic Production | Increased market share, lower costs | Damaged brand image, potential for legal challenges |
8. Next Steps
- Develop a Detailed Strategy: Pfizer should develop a detailed strategy outlining its approach to IP protection in China, including specific objectives, timelines, and resource allocation.
- Build Relationships with Key Government Officials: Pfizer should identify and cultivate relationships with key government officials in China who are responsible for IP protection.
- Engage in Lobbying Activities: Pfizer should actively participate in lobbying activities to advocate for stronger IP protection laws and more effective enforcement mechanisms.
- Monitor Government Policies: Pfizer should closely monitor government policies and regulations related to IP protection and adjust its strategy accordingly.
- Invest in Brand Protection: Pfizer should invest in robust brand protection strategies to prevent counterfeiting and parallel imports.
- Collaborate with Law Enforcement: Pfizer should work closely with Chinese law enforcement agencies to identify and prosecute violators.
- Track Enforcement Results: Pfizer should track the effectiveness of its enforcement efforts and make adjustments as needed.
By taking these steps, Pfizer can effectively protect its IP rights in China and maintain its competitive advantage in the global pharmaceutical market.
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Case Description
On July 5, 2004, Pfizer's China team received disappointing news. China's patent review board just invalidated the company's existing patent on one of its most successful drugs, Viagra. Making matters worse, a Guangdong-based pharmaceutical company laid claim to Viagra's street name "Wei Ge" (Great Brother), arguing that the term was not a well-known trademark in China. With two lawsuits related to intellectual property rights now pending in China, Pfizer wondered whether trade politics or the rule of law would prevail.
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