The ability to compete globally is essential to success in the pharmaceutical industry. The current trend is to establish joint ventures, outsource various stages of the development and production of a single pharma product, and purchase or start an indigenous business in other countries. Successful companies have also moved beyond mere exploratory attendance at trade shows to gain familiarity with foreign markets and environments that are sometimes very different than their "home field." Executives sophisticated in handling cultural distinctions and regulatory nuances have a distinct advantage. (See "Culture Clashes," page 76.)

Understanding cultural differences is part of the secret to success; the other is knowing the company's legal rights, or more significant, its lack of rights in a particular foreign country. Companies need to be familiar with broad multilateral rules to be able to recognize those rights and make informed decisions about foreign initiatives.

This article examines the broad legal framework every pharma producer faces when developing, servicing, pursuing clinical evaluation, selling, or manufacturing components in foreign countries. A general understanding of the international legal regime that governs the actions of various countries can help pharma executives know what to anticipate and how to react.

The United States continues to be the leader in providing patent protection for innovative products, but the clear driving force today is the multilateral efforts under the auspices of the World Trade Organization (WTO) to promote and refine the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Although TRIPS was initiated through the Uruguay Round of multilateral trade negotiations and signed by the member-nation leaders on April 15, 1994, it continues to be the subject of much debate. Negotiations on various aspects of TRIPS continued during a second meeting in Doha, Qatar in 2001. A detailed analysis of the TRIPS agreement and the pharma industry is available at http://www.wto.org/english/tratop_e/trips_e/pharmpatent_e.htm.

The agreement requires all WTO members to create working intellectual property systems that not only establish basic legal definitions of intellectual property rights-such as patents, trademark registrations, and copyrights-but that also implement efficient registration procedures and effective enforcement regimes. TRIPS patent protection extends to products and processes and must last at least 20 years from the date the patent application was initially filed.

The implementation of TRIPS is essential to the successful internationalization of the pharma industry. If anything, the agreement's negotiations and discussions have identified the relevant areas of weakness and controversy that need resolution both in the agreement and in the interests of developed versus developing countries. Developing country members have made progress meeting their TRIPS obligations but have yet to fully satisfy them.

In Development WTO developing country members-including Argentina, Brazil, Egypt, India, and Israel-were given a five-year grace period, until January 1, 2000, to implement most of their TRIPS obligations, but the success of such implementation remains under review and is subject to interpretation. The least-developed WTO members-primarily countries in Africa-were given an 11-year transition period, until January 1, 2006, but that deadline may be extended. Pharmaceutical products are subject to an additional waiver that allows for the delay of product patent protection by all developing countries until January 1, 2005. On June 27, 2002, the WTO TRIPS Council approved a decision extending the waiver for the least-developed countries until 2016.

The countries able to benefit from the extension have two obligations. First, they had to allow patents to be filed, starting January 1, 1995, even though they are not required to decide about whether to grant any patent until January 1, 2005-commonly referred to as the "mailbox" provision. The process allows an early filing date so the application can satisfy a patenting criteria, such as "novelty." Second, should the country allow the product to be marketed during the transition period, it must give the patent applicant an exclusive marketing right for five years or until a patent decision is made, whichever period is shorter. Although there may yet be others, 13 WTO members have notified the TRIPS council that they have implemented a mailbox system. They include Argentina, Brazil, Cuba, Egypt, India, Kuwait, Morocco, Pakistan, Paraguay, Tunisia, Turkey, the United Arab Emirates, and Uruguay.

India poses a particular problem. Opting for the permissible January 1, 2005 patent-protection deadline, the country has still failed to implement other TRIPS obligations, including protection for proprietary data of inventor companies and various enforcement and judicial remedies. The failure means that India's industrial property system is the default regulatory regime, which was initially structured to permit domestic companies to pirate the inventions of other countries.

As another example of particular problems, the TRIPS agreement allows member countries to provide for the use of patented inventions for R&D. Some countries take this notion further by allowing generics manufacturers to obtain marketing approval from government authorities without the patent holder's permission and before the patent protection expires. This practice is sometimes called the "regulatory exception" or "Bolar" provision. A Canadian law implementing the practice was upheld as consistent with the TRIPS agreement in a WTO dispute settlement panel report adopted by the WTO Dispute Settlement Body on April 7, 2000. But such provisions can be poorly implemented and counterproductive to future R&D.

In Australia, for instance, a 1998 patent-term extension law permits "springboarding," which allows generic manufacturers to do all the required testing before the expiration for patents that were granted extensions under the 1998 law. Australia justified that Bolar provision on the grounds that the new extension for existing patents was a boon to the present patent holders, which necessitated a matching offset favorable to producers of generic products. Current patent holders complain that a springboarding compensation was not necessary considering the increasingly long delays in market approval resulting from the strict requirements for cost-effectiveness data and the difficulties of getting listed on

Australia's Pharmaceutical Benefits Scheme, the government-run prescription program.

Without immediate access to the market, patent holders that were granted extensions are unable to get sufficient returns under patent exclusivity to invest in future R&D. Australia's recent enactment of a law providing for five years of confidential data protection alleviates some of the concerns about springboarding, but it would be better

if it were extended to ten years and covered already-approved chemical entities. For a review of other examples of specific problems with various countries patent regimes, see the US Trade Representative's "Special 301" Report on Intellectual Property Barriers, http://www.ustr.gov/enforcement/special.pdf.