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To Lobby or to Partner? Explaining the Shifting Political Strategies of Biopharmaceutical Industry

Associations in South Africa and IndiaTheo Papaioannou, Andrew Watkins, Julius Mugwagwa & Dinar Kale

Development Policy and Practice, The Open University, UK

Email: Theo.Papaioannou@open.ac.uk

DSA Annual Conference, London 1st November 2014

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Industry Associations and Health Innovation

• Paper is based on a larger study that examines the extent to which biopharmaceutical industry associations in South Africa and India promote healthcare innovation

• Paper seeks to explain findings, showing a gradual shift in political strategies, from pure lobbying to greater partnering with government

• We analyse this shift over time, looking at a history of government-industry relations that is punctuated by periods of regulatory uncertainty, particularly over IPR: Weak IPR = access to medicines Strong IPR = innovation and industry growth MNCs vs generics; government vs MNCs and global institutions

Innovation Systems Approach• Innovation as a recursive learning process that relies on interactions between

actors and institutions (Freeman, 1995): Government-Industry interactions

• Political processes and actors through which institutions are historically informed are missing: Economic and innovation policy? Regulation?

• Growing lit on Intermediaries (Howells, 2006) : Knowledge exchange between firms Network building – collaboration and norm setting Knowledge on regulation, arbitration, intellectual property rights

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Industry Associations• Considered controversial actors (Olson, 1982):

Special interests which run counter to the public good Discourage innovation Undermine democratic processes

• Potential ‘capacity building’ actors (Kshetri & Dholakia, 2009): Fill institutional knowledge gaps Shape regulatory environments for innovation and growth

• Effectiveness based on their ability to (Athreye and Chaturvedi, 2007) : Share and exchange knowledge Forge and maintain strong network ties with government Build industry coalitions – negotiate with a single voice

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Government-Industry Relations in Developing Countries

• Corporatism (Thomas, 2004)

• Weak growth coalition (Moore and Schmitz, 2008): Minimal recognition of co-dependence Little to no cooperation

• Strong growth coalition (Schneider and Maxfield, 1997): Agreement on Neo-liberal growth model High degree of reciprocity, trust, and credibility

• Development coalition (Handley, 2008): promotes a pattern of growth that is focused on the development needs of the

poor (Seekings & Nattrass, 2011) Deep and substantive partnering

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Historical PerspectiveOur analysis traces developments during three main periods within different national context: •Pre-liberalisation:

South Africa: Apartheid era (1948-1994) India: Post-Independence (1947-1990)

•Expanding pluralism: South Africa: transition and post-Apartheid (1994-2005) India: period of increasing liberalisation (1990-2005)

•Increasing partnership: South Africa: current period India: current period

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South Africa: Pre-liberalisation/Apartheid Era

• Government-Industry Relations: A co-dependent yet tense relationship; A command oriented state, verging on state corporatism; dominated by mining, energy,

and defence Little to no genuine negotiation

• Pharmaceutical Industry: Relatively small domestic industry/limited R&D Reliance on MNCs; high prices for medicines Some MNC pull-back due to apartheid, growth of generic companies (e.g. Adcock

Ingram)

• Industry Associations: Established but constrained PMA (1967), NAPM (1977)

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South Africa: Expanding Pluralism/Transition and post Apartheid

• Government-Industry Relations: Cooperation but distrust: ANC views industry as a pillar of apartheid ANC inherits centralised and command oriented institutions Economic liberalisation is pursued

• Pharmaceutical Industry: MNCs re-establish themselves TRIPS is adopted under flexibility agreements ‘Big Pharma v Nelson Mandela’ : 39 mostly MNCs take government to court over HIV

drug import provision; case is eventually dropped

• Industry Associations: Due to court case, PMA dissolves, splitting into PIASA and IMSA PIASA (domestic companies/generics); IMSA (research based and MNCs) Negotiate under greater mistrust and industry fragmentation

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South Africa: Increasing Partnership?• Government-Industry Relations:

Relations tend to be tense but increasing collaboration is evident Growing number of public-private partnerships Renewed focus on S&T infrastructure

• Pharmaceutical Industry: Almost all research based companies are MNCs – little to no R&D done in SA MNCs continue to fight weaker IPR laws: IPASA controversy Domestic companies that produce generics are thriving, but most generic medicines are

imported from India Greater industry cohesion on some regulatory issues (e.g. drug registration and pricing)

• Industry Associations: A diversity of associations: IPASA, NAPM, SAMED, SMASA, AfricaBio Growing collaboration on S&T infrastructure, Industry-university partnerships and NHI. IPASA controversy and set-back

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India: Pre-liberalisation/Post-Independence

• Government-Industry Relations: Focus on removing colonial system and alleviating poverty Protectionist support of domestic industry and nationalisation Expansion of government bureaucracy Patent Act 1970 – prohibited patents on most pharmaceuticals

• Pharmaceutical Industry – as a result of The Patent Act of 1970: India’s generic pharma industry grew substantially resulting in a dramatic decrease in the price of

medicines sold in India. Positioned India as a major exporter of generic medicines Facilitated India’s impressive reverse engineering skill-sets Discouraged the establishment of a research based pharmaceutical industry

• Industry Associations: Indian Manufacturers Association (IDMA) formed in 1961 OPPI, established 1965 IPA, established 1939

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India: Increasing Pluralism and Liberalisation

• Government-Industry Relations: Much domestic industry pressure against liberalisation Sustained poverty pushed the government to seek aid and growth through trade liberalisation

and access to foreign donors – this superseded domestic industry concerns Attained membership to the WTO, but negotiated TRIPS flexibilities and extension

• Pharmaceutical Industry: Domestic industry had become very successful under 1970 Act MNCs were in favour of TRIPS adoption The domestic pharmaceutical industry was split: companies such as Ranbaxy and Piramal that

had some R&D activities were more supportive; generic producers were against.

• Industry Associations: The two leading industry associations for research based companies, the Indian Pharmaceutical

Association (IPA), and the Organisation of Pharmaceutical Producers of India (OPPI) heavily advocated TRIPS adoption.

IDMA was very vocal in its opposition to TRIPS

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India: Increasing Partnership?• Government-Industry Relations:

Liberalisation has been a tremendous success for industry growth Relations are generally cooperative Poverty and inequality are still huge challenges Growing public-private partnerships

• Pharmaceutical Industry: Diverse and robust industry; mix of generic companies, MNCs and research based domestic

companies, growing biotech industry Fragmentation on IPR and TRIPS transition, but cooperation on many issues Conflict with government is generally not publically fought

• Industry Associations: Deep connections to government Cooperation among different associations Facilitate a number of public-private partnership

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Conclusions 1

• Some of our findings support previous research, suggesting industry associations are more effective when the industry is relatively cohesive: fragmentation leads to conflict and distrust

• Effectiveness of industry associations is also based on the willingness of government over time to meaningfully negotiate; this and when they are supportive of domestic industry

• South Africa: decades of tension between the government and industry have reinforced fragmentation and industry-government distrust. In turn, this has inhibited constructive innovation policy dialogue.

• India: a history of strong government support for and cooperation with the domestic pharmaceutical industry developed domestic capacities and allowed the pharmaceutical industry to transition, somewhat unevenly, to greater TRIPS compliance.

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Conclusions 2

• Shifts toward greater partnership with government are historically evident:

South Africa: this shift appears to be an attempt to reset relations with government.

India: this shift can be viewed as a deepening of already highly integrated government-industry ties.

• Findings provide insight to the conditions through which growth coalitions either remain weak, or grow strong: effectively promote both the growth of domestic industry and the subsequent realisation of positive externalities

• Challenges and possibilities for development coalitions

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This paper draws on a research project, ‘Unpacking the Role of Industry Associations in Diffusion and Governance of Health Innovations in Developing Countries’, funded by The Leverhulme Trust UK, during 2013-15, reference number RPG-2013-013.

Acknowledgements