‘Generics’ saved Cyprus hospitals EUR 70 mln
The future of industry in Cyprus is for local companies to find a niche, just as Medochemie has done growing from a small manufacturer in Limassol in the 1970s to become the largest pharmaceuticals company on the island with exports reaching well over 100 mln euros. Of these, 60% are destined to other EU markets.
But to get there, the company overcame all sorts of obstacles, such as legal battles and harassment from multinationals that did not want to give up their lucrative patents to smaller, lower-cost manufacturers, in order to provide cheaper medicines to the general public in the form of ‘generic’ drugs, as medicines identical to the original brands are known, following the expiry of their patents.
However, the biggest frustration of all came from the island’s politicians who could not see the benefits of establishing a generic pharmaceuticals industry that would have attracted foreign investors in the areas of research and development, importing with them tens if not hundreds of scientists, and also boosted more Cyprus companies to export around the world.
In an interview with the Financial Mirror, Medochemie’s executive chairman Dr Andreas Pittas, who also heads the Employers and Industrialists Federation (OEV), said that some of the other pharmaceuticals manufacturers have also faced similar troubles as Cyprus rejected a key exemption to international patent rights in 1999, allowing for Israel, Hungary and Malta to take advantage and develop their own industries.
Ironically, a year after EU accession, the European Commission obliged Cyprus to adopt the ‘Bolar Roche’ exemption, which meant that the economy lost out on six years of development and investment in this high-tech industry.
Despite all this, Dr Pittas had high praise for the government’s Chief Pharmacist who changed age-old rules that only favoured the multinational brands and introduced a new system in the public procurement process for state hospitals, whereby generic medicine could also be chosen, effectively saving the state some EUR 68-70 mln over a number of years.
Pittas added that his company has also improved on older patents and introduced some new and more effective medicines than their conventional counterparts, while its research facilities in Cyprus and Greece have made it a leading player in both markets.
Medochemie produces 180 different medicines, exporting 96% of its production which is estimated at well over 100 million euros. The company employs 1150 at home and abroad, 45% of whom are university graduates, with an in-house R&D department with five scientists.
Below is the full text of the interview:
How did the son of a herbs trader become one of the most influential industrialists in Cyprus?
My late father was a general merchant at the time, shortly before and after the Second World War he was exporting along with a pharmacist friend Cypriot herbs to European markets.
It is true, that industry has little to do with trade. Industrial activity is based on creativity, a lot of knowledge and love for the subject. I did not aim to become one of the most influential industrialists, it just happened.
Considering the worldwide economic crisis, how does a pharmaceuticals company respond? Are its products in constant need, hence, a recession-proof industry?
The unprecedented economic crisis we are facing now is hitting hard a lot of sectors and one has to be very careful and alert to avoid calamities. The industry is not recession proof as one might think but rather a less recession-prone industry.
Don’t forget that our activities stretch nearly all over the world. Currencies have been affected, demand has decreased and governments have acted sometimes in panic. All these constitute obstacles for an international player and dangers to be aware of.
Take us back to 1976 when you started Medochemie. This was just two years after the war, Limassol was full of refugees and little work. Shipping was only now becoming a new trend. Was it not a risky decision? Where did you find the money? Did they not say, at the time, that “you must be crazy”?
Indeed, 1976 was the year when a lot of industries were created in Cyprus as a result of the war. Let me explain: wars bring out in people the urgency to create new things. The destruction brings with it a drive to create. At that time Cyprus was in a chaotic situation, there were a lot of jobless people, a lot of refugees, a lot of despair. When I decided to start in the pharmaceutical industry, I was considered as crazy. I remember people calling my parents and saying they believed their son was a bit “derailed”.
Nevertheless, looking back in hindsight it was a very risky decision, “medicines made in Cyprus” were in the least a funny thing to talk about, even though Cyprus has a long history in exporting medicines since ancient times.
My money at that time was little but both the National Bank of Greece and Bank of Cyprus were prepared to extend loans. I started with a handful of people, ten in all, and I was following a lot of areas of activity myself, regulatory, marketing, development. etc.
Over the years, Medochemie has been the target of industrial espionage. Why did this happen? Please define ‘generic’ drugs and ‘licensed’.
At a time, Medochemie was the target of industrial espionage because we were doing ‘reverse engineering’ on the production of a specific established medicine, which was very expensive to produce. We secured a novel way to produce the molecule in a much cheaper way. We tried to patent our method and this raised the “problems”.
For somebody to comprehend the nature of generics we have to explain that like other inventions, drugs are covered by patents of quite long validity (20-25 years). During the patent time the company owner of the invention has a practical monopoly. Only when the patent is over can you sell similar products. These are usually called ‘generic medicines’ and this was only made possible by very early regulations in America and later in Europe. It is the time when real competition starts for a medicine.
At the time that I started manufacturing, generics were unheard of here, but also wide areas of Europe were void of generic drugs (the giants of the generic industry in Europe started in the late sixties and early seventies when the legal frame allowed them to operate).
Even in Cyprus hospital, tenders were issued in brand names and not generic names. This changed when Mr. E. Kkolos was appointed as Chief Pharmacist. Buying medicines “generically” saved the state millions of pounds during the years.
We produce since then, mostly generic drugs and we also produce a few “super generics” as they are called. These are medicines of additional value either because of special delivery systems or some improvements in the release of the molecule. We are holders of patents on different aspects of their production.
Obviously the competition is smaller for such type of medicines.
Why have you often been the target of global giants?
Both the company and I were targets because we tried along with the European Generic Association in Brussels (EGA) of which I was a vice-president then, to introduce in Cyprus the Bolar Roche exemption in the patent law, a clause already valid in the USA since 1984, which allows a firm to work on a patented medicine before a patent’s expiry.
To develop a generic drug it takes up to five years. So if you do not develop it in time you cannot launch a similar product after the patent’s expiry. It will simply take another five years for development, adding a further five years to a patent’s life (and a multinational’s income). In America, pressure groups insist to have cheaper drugs immediately after a patent’s expiry and there are numerous interesting court cases against pharmaceutical companies delaying this from happening.
Global giants, however, did not like that. There was a lot of negative advertising against us. American industry and the lawyers representing major pharmaceutical associations were spending huge amounts of money in efforts to deter governments in allowing such clauses in patent laws.
In Cyprus, of course, they went against us. I tried to do some work with the parliament and tried to convince people that the introduction of Bolar Roche was to the benefit of the economy, but it was in vain as members voted against Bolar Roche. Meanwhile, this specific clause was passed in Israel with only one MP abstaining.
In Brussels at the time, we estimated the numerous other benefits a country could have out of the Bolar Roche exception. We could have established bioequivalence centres in Cyprus to test drugs and consultancy firms to carry out relevant tasks for the launch of generics. I remember calculating at the time an influx of foreign exchange in the amount of 30-40 million pounds a year, deriving from activities in Cyprus based solely on the Bolar Roche clause benefits, not to mention the possibility of employment for some 100 scientists.
It seems that nobody understood the meaning of such a clause. Only Malta grabbed it, as well as Hungary. They adopted it with tremendous results. In Greece, the legal environment did not prohibit R&D on patented products, so, for a time we moved our R&D to Athens.
But imagine, Malta at the time was not on the map of pharmaceutical production. Today, they are ahead of us. It seems that our parliament did not understand which benefits we could have had as a country. Since then I am rather sceptical about our parliament and other sophisticated issues relating to the economy.
Bolar Roche was eventually introduced across Europe. The Commission has in recent years forced all states to introduce it. Not only that, a Commissioner is now after several global giants who tried to “evergreen” their patents blocking thus the timely launching of generics. One could say, really, “o tempora o mores”!
How has EU accession changed Medochemie, did it benefit from a more open environment as regards licenses?
The EU accession overall has been of benefit to us. However, the change of laws and rules in the registration of medicines cost us tremendous delays and huge amounts of money spent in order to meet the new regulatory environment.
Cyprus was given no time derogations concerning legal implementation whereas Poland, Slovakia, the Czech Republic, Hungary, Malta and Germany were given exceptions reaching up to five years to adjust their regulatory environment. We were given just 12 months.
