Harvard Case - Compulsory Licence for Saxagliptin: Protection versus Competition
"Compulsory Licence for Saxagliptin: Protection versus Competition" Harvard business case study is written by Veena Keshav Pailwar. It deals with the challenges in the field of General Management. The case study is 12 page(s) long and it was first published on : Aug 31, 2016
At Fern Fort University, we recommend that Bristol-Myers Squibb (BMS) pursue a strategic approach that balances the protection of its intellectual property with the need to foster innovation and access to affordable healthcare in emerging markets. This approach should involve a combination of:
- Negotiating a voluntary licensing agreement with Cipla: This would allow BMS to maintain some control over the manufacturing and distribution of Saxagliptin in India, while ensuring access to affordable treatment for a larger population.
- Developing a robust intellectual property strategy: This would involve actively pursuing patent protection in key emerging markets and exploring alternative mechanisms like data exclusivity to safeguard its investment in research and development.
- Engaging in proactive stakeholder engagement: This would involve collaborating with governments, NGOs, and other stakeholders to address concerns about access to affordable medicines and to develop innovative solutions that meet the needs of all parties.
2. Background
This case study explores the dilemma faced by Bristol-Myers Squibb (BMS), a pharmaceutical giant, when the Indian government granted a compulsory license to Cipla, a local generic drug manufacturer, to produce and sell Saxagliptin, a diabetes drug. This decision was made under the Indian Patents Act, which allows the government to issue such licenses in cases where a drug is not being manufactured or made available at an affordable price.
The main protagonists in this case are:
- Bristol-Myers Squibb (BMS): A multinational pharmaceutical company with a strong intellectual property portfolio and a significant investment in research and development.
- Cipla: An Indian generic drug manufacturer known for its commitment to providing affordable medicines to developing countries.
- The Indian Government: The government is responsible for ensuring access to affordable healthcare for its citizens and has the authority to grant compulsory licenses under the Indian Patents Act.
3. Analysis of the Case Study
This case study can be analyzed through the lens of various frameworks, including:
- Porter's Five Forces: The case highlights the competitive intensity in the pharmaceutical industry, with the threat of substitutes (generic drugs) and the bargaining power of buyers (governments and patients) being significant.
- Corporate Social Responsibility (CSR): BMS faces a dilemma between its responsibility to protect its intellectual property and its obligation to contribute to global health. The case raises questions about the ethical implications of intellectual property rights in the context of access to essential medicines.
- International Business: The case study demonstrates the complexities of operating in emerging markets, where legal frameworks and cultural norms can differ significantly from those in developed countries.
4. Recommendations
BMS should adopt a multi-pronged approach to navigate this complex situation:
Short-Term:
- Negotiate a Voluntary License: BMS should engage in constructive dialogue with Cipla and the Indian government to explore a mutually beneficial agreement. This could involve a royalty payment structure, technology transfer, or joint marketing efforts.
- Strengthen Intellectual Property Protection: BMS should actively pursue patent protection in key emerging markets and explore alternative mechanisms like data exclusivity to safeguard its investment in research and development.
- Engage in Stakeholder Dialogue: BMS should proactively engage with governments, NGOs, and other stakeholders to address concerns about access to affordable medicines and to develop innovative solutions.
Long-Term:
- Develop a Sustainable Pricing Model: BMS should explore pricing models that ensure profitability while also making medicines accessible to low-income populations. This could involve tiered pricing, volume discounts, or public-private partnerships.
- Invest in Research and Development for Emerging Markets: BMS should prioritize research and development efforts that address the specific needs of emerging markets, such as developing affordable and effective treatments for diseases prevalent in these regions.
- Foster Innovation through Collaboration: BMS should explore partnerships with local manufacturers and research institutions in emerging markets to foster innovation and knowledge sharing.
5. Basis of Recommendations
These recommendations consider the following factors:
- Core Competencies and Consistency with Mission: BMS's core competency lies in its research and development capabilities. The recommendations aim to protect this investment while ensuring access to affordable medicines.
- External Customers and Internal Clients: The recommendations consider the needs of both patients and shareholders. They aim to provide affordable access to medicines while ensuring the long-term sustainability of BMS's business.
- Competitors: The recommendations acknowledge the competitive landscape and aim to maintain BMS's competitive advantage while fostering a collaborative environment.
- Attractiveness ' Quantitative Measures: The recommendations aim to maximize profitability while ensuring access to affordable medicines. The specific financial implications of each recommendation will need to be carefully assessed.
6. Conclusion
The case study highlights the complex interplay of intellectual property rights, access to healthcare, and corporate social responsibility. BMS needs to navigate this complex landscape by adopting a strategic approach that balances the protection of its intellectual property with the need to foster innovation and access to affordable healthcare in emerging markets.
7. Discussion
Other alternatives not selected include:
- Refusing the compulsory license: This would have protected BMS's intellectual property but could have led to negative public relations and potentially hampered access to affordable healthcare in India.
- Litigating against the Indian government: This would have been a costly and time-consuming process with an uncertain outcome.
Key assumptions of the recommendations include:
- The Indian government is willing to negotiate a mutually beneficial agreement with BMS.
- BMS can develop a sustainable pricing model that ensures profitability while also making medicines accessible to low-income populations.
- BMS can successfully engage with stakeholders and build trust with governments and NGOs in emerging markets.
8. Next Steps
BMS should immediately begin implementing the following steps:
- Initiate negotiations with Cipla and the Indian government: This should be done within the next 30 days.
- Develop a detailed plan for strengthening intellectual property protection in emerging markets: This plan should be finalized within 60 days.
- Establish a dedicated team to engage with stakeholders in emerging markets: This team should be fully operational within 90 days.
By taking these steps, BMS can effectively manage the challenges posed by the compulsory license and ensure that its intellectual property is protected while contributing to global health.
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Case Description
In June 2015, Lee Pharma Limited, a small Indian pharmaceutical company, filed an application with the Indian Patent Office for a grant of a compulsory licence to manufacture the diabetes drug Saxagliptin on the grounds that the patented version of the drug had not been made available to the public at an affordable price. The granting of a compulsory licence was expected to make the drug more affordable for the general public, but it would also undermine the interests of the patentee, a Western multinational company. If the developed world imposed sanctions against India in retaliation for such a protectionist measure, the flow of trade and foreign capital into the country would be adversely affected. Should the patent office strictly enforce the patent regime, which would encourage higher foreign capital inflows in research and development in the Indian pharmaceutical industry and promote inventions and innovations in the country? Or should it grant the compulsory licence, thereby attaching greater weight to the welfare of India's general public?
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