Nagoya Protocol and its Implications on Pharmaceutical Industry

MARCH | 2011

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Nagoya Protocol and Its Implications on Pharmaceutical Industry

IntroductionThis white paper focuses on the treaty on biodiversity which was written in October 2010 in Nagoya, Japan. The paper highlights how the Nagoya Protocol is expected to affect the pharmaceutical industry in the future. It also highlights the potential impact of the protocol on the procurement strategies of pharmaceutical companies from biodiversity-rich countries.

The Nagoya Protocol and BiodiversityThe Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits is a landmark treaty that was devised keeping in mind the increasing loss of biodiversity on Earth. It is a supplementary agreement to the earlier convention on biological diversity and provides a legal framework for the objectives of the convention.

The Nagoya Protocol and BiodiversityThe Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits is a landmark treaty that was devised keeping in mind the increasing loss of biodiversity on Earth. It is a supplementary agreement to the earlier convention on biological diversity and provides a legal framework for the objectives of the convention.


Factors ThatLed to the

Nagoya Protocol

Drug makers have to disclose the origin of genetic resources during patent applications. The benefit and sharing model is applicable

for all plant and animal resources that can be used in the development of drugs.

Demand for a legally binding protocol from developing nations and biodiverse rich nations

The clauses on benefit sharing between parties are vague in the 1992 Convention on Biological Diversity. No legally binding clause was included in this treaty.

To detect illegal exports of geneticmaterials

Ensure benefit sharing when genetic resources are provided by the host country to the sourcing organization.

Creation of a protocol on the equitable sharing of the benefits that arise from the use of genetic resources.

Establish a more stable and singular focal point to aid organizations in accessing genetic resources.

Identification of new mechanisms to finance the conservation of nature.

Formation of a strategic plan that strives to conserve biological diversity until the year 2020.

To provide more clarity on issues

pertaining to genetic resources

To eliminate biopiracy

To ensure universal acceptance of the ABS

model

To ensure ABS is implemented in a

timely and fair manner


Access and Benefit Sharing Model The implementation of the access and benefit sharing model involves three stages:

Prior Informed Consent for Access to Genetic Resources:

The access and benefit sharing model requires that every organization sourcing genetic resources from a biodiversity-rich country obtain prior consent from the host country before collecting resources. Consent is provided by a single focal point representing the country, which acts as the intermediary between the organization and the indigenous community that owns the resource.

Mutually Agreed Terms for Access and the Use of Genetic Resources:

Mutually agreed terms that contain the conditions and provisions for access and benefit sharing between the user, the provider, and other relevant stakeholders is drawn up. Both parties must agree to the terms before resources are collected by the user.

Benefit Sharing from the Use of Genetic Resources:

Benefit sharing may involve monetary or non-monetary benefits that arise from access to genetic resources or associated traditional knowledge. If the source of a genetic resource is unknown, a single common trust fund is created in collaboration with all the owners of the genetic resource. The payment of benefits is made from this global fund if the origin of the species is unknown or if a transboundary exists. Funds obtained must be used to support the conservation and sustainable use of biodiversity.

Type of BenefitMonetary Benefits:

Monetary benefits are a percentage of the revenue earned from the sales of a final product derived from the genetic resource collected by the user from the provider. These benefits also include the lump sum amount initially paid to gain access to the material.

2000:WIPO IntergovernmentalCommittee on Intellectual Propertyand Genetic Resources,TraditionalKnowledge, and Folklore

1992: Convention onBiological Diversity

1994:TRIPS Agreement harmonizednational systems with regard tointellectual property rights.

2010: Nagoya Protocolon Access to GeneticResources and the Fairand Equitable Sharing ofBenefits Arising fromTheir UtilizationSharing of BenefitsArising from TheirUtilization

2001: Doha DeclarationCommitment onsustainable practices usedby multi lateral tradingsystems

2002:World Summit onSustainable Developmentand practices

Access and Benefit Sharing Timeline

Even

ts L

eadi

ng U

p to

Nag

oya

Time

2002: Bonn Guidelines on Access toGenetic Resources and the Fairand Equitable Sharing of BenefitsArising out of Their Utilization


Non-monetary Benefits:

Non-monetary benefits include benefits arising from the process of research and development, such as capacity building and technology transfer through infrastructure, expertise and know-how building, and training through joint research. Process benefits that arise from the sustainable use of genetic resources also fall under non-monetary benefits.

Biodiversity-rich Regions of the World

The following biodiversity-rich countries are likely to gain the most from the Nagoya Protocol.

Latin America Asia Africa Australia & OceaniaBrazil Philippines Madagascar Australia

Colombia Indonesia Democratic Republic of Congo Papua New Guinea

Ecuador Malaysia South Africa

Mexico India

Peru China

Venezuela

Importance of Biodiversity to the Pharmaceutical IndustryThe pharmaceutical industry has had a long and fruitful relationship with biodiversity. Large pharmaceutical companies generate close to USD 250 billion annually from drugs directly derived from biodiversity. Taxol, a blockbuster drug that was discovered by scientists of the US government and developed by Bristol Myers Squibb Co. in 1992, contributed close to USD 9 billion between 1992 and 2000. This drug is derived from the bark of yew trees.

Name of Drug Derived from Properties and Functions

ExenatideGila Monster Lizard Spit

Used as a substitute for insulin and to promote weight loss.

Artemesinin Artemisia annua Used to treat malaria.

Captopril Brazilian Viper Used to lower blood pressure.

Calcimar and Miacalcin Coho Salmon Used to treat osteoporosis.

IND TM 601 Israeli Yellow ScorpionObserved to attack malignant brain tumours (known as glioma tumours) that are responsible for two-thirds of brain cancer cases, without harming healthy cells.

Methanolic Extracts Ruta GraveolensBeing tested for the treatment of colon, breast, and prostate cancer.

Medium High biodiversityHigh biodiversity Low biodiversityMedium biodiversity


In 2010, just over 100 natural product based molecules were in clinical trials, a 30% drop compared to 2000 levels. Approximately 80% of pharmaceutical drugs were derived from natural product origins in 1990; by 2005, however, this figure fell to around 50%. In 2010, the natural products mix in the pharmaceutical industry was estimated to be 40%. Currently, 62% of cancer drugs approved by the US Food and Drug Administration come from, or are modelled based on, natural products. For example, Taxol is used to treat breast and ovarian cancer.

Changing Dynamics of New Chemical Entities

Natural Products Used in Clinical Trials

Pharmaceutical Drugs – Natural Products vs. Synthetic Products

Before 1990s 2002-2005 2010

20%

50% 50%

60%

40%

80%

38%

18%10%

9%

8%

17% Cancer

Anti-infective

Neuropharmocological

Cardiovascular/ GastrointestinalInflammation

others

48%

27%

11%

11%3%

Plants

semi-synthetic

bacterial

animal

fungal

14%

26%

9%

50%

1%

Natural

Derived from a Natural SourceBiological

Synthetic

Others

5%

23%

14%54%

4%

Natural

Derived from a Natural SourceBiological

Synthetic

Others


In 2010, more than 40% of all the new chemical entities were obtained from natural sources. Plants are the major source for drugs of natural origin in the clinical phase. Nearly 48% of drugs in the clinical phase are derived from plants.

Drugs currently in the pipeline that are derived from natural sources are mostly cancer and anti-infective medicines. These two therapeutic areas account for 56% of all drugs of natural origin in clinical trials.

Impact of the Nagoya Protocol on the Pharmaceutical MarketThe Nagoya Protocol, especially the Access and Benefit Sharing clause, calls for systems to be put in place. These systems are expected to drive the costs incurred by pharmaceutical companies during the drug discovery phase.

•��The�Nagoya�Protocol�could�have�an�adverse�impact�on�the�pharmaceutical industry. Many companies feel that the Access and Benefit Sharing clause will increase product development costs and complicate the drug discovery phase. According to the protocol, organizations will have to pay a significant amount of their revenue and royalties to indigenous communities and host countries for the drug they develop from genetic resources.

•��The�revised�patent�system�will�also�add�to�the�cost�of�drug development. Due to the rules and regulations laid down by the Nagoya Protocol, organizations would have to execute joint patents with the communities from whom they source resources. For multiple ownership cases, the patenting policy is even more obscure.

Present Status of the Nagoya ProtocolEach country must ratify the Nagoya Protocol; in addition, the treaty must be passed by a country’s legislative body. According to the Nagoya Protocol, certain restrictions have to be followed by all organizations that use genetic resources from other countries. For example, each organization is required to set up biodiversity indicators. These biodiversity indicators should consist of a combination of various biodiversity resources that are used by organizations and measure the company’s impact on the environment.

Implementation Issues:•��Presently,�there�are�no�coherent�biodiversity�indicators�

that can be used to measure the corporate impact on biodiversity.

•��It�is�difficult�to�measure�the�performance�of�small-�to�mid-sized companies with regard to ecosystems usage.

•��The� corporate� sector� has� not� yet� embarked� on� the�large scale incorporation of sustainable biodiversity practices.

Examples of Biodiversity IndicatorsNote: It has been suggested that close to 20 biodiversity factors should be taken into account while establishing biodiversity indicators for each company.

Signatories of the Nagoya ProtocolThe Nagoya Protocol is not retroactive and does not affect already existing products. The protocol will apply only for products in the pipeline. Algeria, Brazil, Colombia, Yemen, Netherlands, Denmark, Sweden, Japan, Mexico, and Rwanda have already signed the Nagoya Protocol. It will be open to new signatories from March 7, 2011 to March 6, 2012 and will come into effect within 90 days of the fiftieth ratification of the Nagoya Protocol.

Religious Significanceof the Location

Water Filtration

Eco Tourism

Soil Formation

Cultural Services

Goods(such as timber)

Nutrient Recycling


Access and Benefit Sharing Industry PracticesPRE-ACCESS

•��The�user�(i.e.�the�enterprise�or�researcher)�interested�in�using�the�natural�resource�requests�access�to�the�country�that provides the genetic resource through prior informed consent (PIC).

•��The�request�should�be�made�to�a�central�focal�point�designated�by�the�country

•��The�provider�of�the�resource�and�all�local�communities�must�give�prior�consent�with�full�knowledge�of�the�targeted�use of the genetic resource.

•��Mutually�agreed�terms�(MAT)�are�established�between�the�two�parties�that�define�how�the�benefits�will�be�shared�with the exporting country/ community.

•��Authorization�is�issued�by�a�national�authority�of�the�exporting�country.

•��Information�on�access�and�benefit�sharing�is�communicated�to�the�clearing�house.

•��A�legally�binding�ABS�contract�is�made�between�the�provider�and�user�of�the�genetic�resource.�

BENEFIT SHARING

•��The�user�of�the�genetic�resource�has�to�abide�by�the�MAT�and�conditions.

•��The�user�party�has�to�establish�and�maintain�appropriate�communication�with�all�stakeholders�at�different�levels.

•��All�communities�and�indigenous�people�have�to�be�involved�in�the�research.

•��The�user�must�provide�all�appropriate�information�and�document�it�according�to�PIC/MAT�and�conditions.�It�must�also ensure compliance with PIC/MAT and other expectations, including benefit sharing.

•��The�user�must�ensure�timely�provision�of�benefits�according�to�the�schedule�outlined�in�the�PIC/MAT�contract.

•��Compliance�with�ABS�standards�is�necessary�for�many�companies�to�secure�finance,�certify�products,�and�access�markets, as well as to be recognized for ethical and sustainable practices.

•��The�user�must�verify�with�stakeholders�that�obligations�and�expectations�are�met.�

•��A�breach�of�regulations�can�lead�to�fines�or�the�loss�of�future�concessionary�rights.

PROVIDER OF NATURAL RESOURCE

USER OF NATURAL RESOURCE


PartiesTime

PeriodDetails of the MTA Impact

Tropical Botanic Garden and Research Institute (TRGRI) and the Kani tribe in India

1997 A mutual agreement was made between the two parties for the cultivation of Trichopus zeylanicus, which contains anti-fatigue and energetic properties.

ABS Specifications:

•�2%�license�fee�to�be�paid�to�TBGRI�by�the�phyto�medical company.

•�Benefits�to�be�equally�distributed�between�the�Kani�tribe and TBGRI.

•�The�remainder�of�the�license�fee�will�be�put�into�the Kani tribe’s trust fund (Kerala Kani Samudaya Kshema Trust).

The model failed due to:

•Unrelenting�bureaucracy�

•Policy�vacuum

•�Lack�of�appropriate�legal�obligations between the parties.

SAN tribe, CSIR of South Africa, Phytopharma, Pfizer, and Unilever

1996 to 2008

The parties agreed to conduct research on Hoodia gordonii, traditionally used by the San tribe as an anti-appetizer.

ABS Specifications:

•�The�San�tribe�will�receive�8%�of�all�milestone�payments CSIR receives from Phytopharma.

•�CSIR�will�receive�6%�of�all�royalties�once�the�drug�is�commercially developed by Phytopharma.

•�The�San�trust�will�receive�USD�75,000�as�an�initial�benefit-sharing payment.

The arrangement failed because:

•�The�drug’s�side�effects�were dangerous.

•�Unilever�lost�more�than�£20 million in four years doing research on Hoodia.

•�There�was�a�huge�rise�in drug prices due to the hype created for the development of the drug.

The Kenya Wildlife Service (KWS), The International Centre for Insect

Physiology and Ecology (ICIPE), and Novozymes and Diversa (Verenium) Corporation

2007 This deal was made for a period of five years for the cultivation of the enzyme Pulpzyme, which is developed by the microorganisms protected by KWS.

ABS Specifications:

•Royalties�will�be�paid�to�KWS.

•The�royalties�paid�will�be�in�the�range�of�0.5-10%.

•�Novozymes�will�transfer�technology�and�provide�training to Kenyan students throughout the agreement period.

•�All�intellectual�property�rights�and�patents�are�to�be�co-owned by both parties.

•Benefits�will�be�equally�shared�by�ICIPE�and�KWS.

This arrangement was successful because:

•�KWS�acted�as�the�national�focal point for Kenya. By going through KWS, Novozymes successfully conducted the agreement.

•�Prior�informed�consent�was obtained from KWS, which represented the Kenyan government.

•�The�microbial�discoveries�were done by KWS researchers trained by Novozymes employees.


ConclusionTime Period

The effect of the Nagoya Protocol will take 2-4 years to be felt as the protocol cannot be implemented retroactively.

Increase in Costs during the Drug Development Stage

The costs incurred by drug companies, especially during the drug development phase, will increase due to the Access and Benefit Sharing clause.

Corruption

The implementation of ABS in countries like India, Indonesia, and Brazil might lead to difficulties in procuring biological material for R&D operations as corruption and red-tapism are already major concerns in these nations.

Biodiversity Indicators & Bioprospecting

As companies implement biodiversity indicators, which would limit the use of biodiversity, organizations will have to restrict their supply chain and production processes to adhere to the protocol.

The Nagoya Protocol could facilitate bioprospecting as the governments that own the resource can provide companies with clear guidelines for bioprospecting.

Royalties

Another major challenge pharmaceutical companies will face in the future is patent rights. Companies are likely to incur costs with regard to royalties as companies might have to pay 2-10% to the community that possess the genetic material.

Types of ABS

Companies prefer to provide technology transfer and advanced training rather than monetary benefits when adopting ABS.

R&D Patenting Production

Increased risk of corruption and red-tapism in developing countries

Increase in the cost of sourcing genetic resources

More complications to patent the final drug due to multiple players and numerous stages.

Increase in production costs due to excess costs incurred during the procurement of resources.

Sharing the royalties of patents for the final drug would increase costs.

Lack of uniformity among various countries over ABS arrangements.

Increase in the time required for bioprospecting and sourcing

Impact of the Nagoya Protocol on Focus Areas

Disclaimer: Strictly no photocopying or redistribution is allowed without prior written consent from Beroe Inc. The information contained in this publication was derived from carefully selected sources. Any opinions expressed reflect the current judgment of the author and are subject to change without notice. Beroe Inc accepts no responsibility for any liability arising from use of this document or its contents.

For more information, please contact [email protected].

Author:

Kurian Kurien | Senior Research Analyst

Aloke Das | Research Analyst

Source: RiS.org, Food and Agricultural Organization of the United Nations, business-biodiversity.eu, Union for Ethical Bio Trade, cbd.int


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Nagoya Protocol and its Implications on Pharmaceutical Industry