The Case for Policy Space: Bangladesh’s Pharmaceutical Sector and Access to Medicines

Dhaka, Bangladesh. Photo via Unsplash.

By Rachel Thrasher

The growth of Bangladesh’s pharmaceutical sector into an economic powerhouse has helped the country meet the necessary criteria for graduation from Least Developed Country (LDC) status. But upon graduation, the country will need to begin bringing its policy landscape into compliance with the trade and intellectual property rules at the World Trade Organization (WTO) it was previously exempt from. As a result, Bangladesh’s pharmaceutical sector is set up for a potential collision course with the WTO, as the country must begin phasing out the flexibilities that allowed the sector its dynamism in the first place.

On Thursday, September 23, the Boston University Global Development Policy (GDP) Center and the South Centre hosted a webinar to discuss new research exploring the possible impact of graduation from least-developed country (LDC) status on Bangladesh’s burgeoning pharmaceutical sector and its on-going development.

The discussion was co-moderated by Kevin P. Gallagher, Director of the GDP Center and Carlos Correa, Executive Director of the South Centre. The event featured presentations by Professor Mustafizur Rahman, Distinguished Fellow at the Center for Policy Dialogue, Rachel Thrasher, Researcher at the GDP Center, and Nirmalya Syam, Senior Programme Officer for the Health, Intellectual Property and Biodiversity Programme at the South Centre. His excellency, Ambassador Mustafizur Rahman, Permanent Representative of Bangladesh to the United Nations and other International Organizations in Geneva, provided comments and reflections. Questions and answers were supported by GDP Center paper co-authors Veronika Wirtz, Professor of Global Health at the Boston University School of Public Health, and Warren Kaplan, Assistant Professor of Global Health at the Boston University School of Public Health.

Main highlights

Professor Kevin P. Gallagher introduced the session by providing a short background of the success that Bangladesh has experienced and the imminent challenges facing the country as it continues on its path toward LDC graduation. He pointed out that in the midst of an unprecedentedly dark year globally, Bangladesh has been a “bright spot.” As a member of the Committee for Development Policy at the United Nations, Gallagher had the privilege of voting to recommend that Bangladesh graduate on the basis of enormous advancement in development indicators. Once considered one of the most vulnerable countries in the world, Bangladesh now enjoys a higher GDP per capita and longer life expectancy than its much larger neighbors, India and Pakistan.

Gallagher pointed out that the “cornerstone” of Bangladesh’s development strategy is its execution of policies for structural transformation, diversifying the economy by increasing industrial capacity and technological innovation. Beyond Bangladesh, Gallagher highlighted that even developed economies are beginning to seek to emulate their policy toolkit to increase industrial capacity in the pharmaceutical sector.

The COVID-19 pandemic revealed the high levels of concentration in the global pharmaceutical industry, where a handful of large firms hide behind patent protection and export controls, limiting access to lifesaving COVID-19 products. Bangladesh has been able to harness the power of its LDC status in part because it did not have to adhere to many of the global rules governing trade, investment and intellectual property. Gallagher highlighted that two studies prepared by the GDP Center and the South Centre explore the extent to which Bangladesh’s current status is not compliant with global rules and what that means for the country, as well as other graduating LDCs and lower- and middle income countries (LMICs) on the precipice of graduation.

Will Bangladesh be able to continue these strategies upon graduation?

Next, Mustafizur Rahman summarized a recent GDP Center working paper, which asks to what extent Bangladesh will be able to deploy their industrial policy strategies after graduating from LDC status. The research found that, despite their successful deployment of key trade and industrial policies to build domestic manufacturing capacity in the pharmaceutical sector, Bangladesh’s graduation from LDC status will bring the country into conflict with international trade and intellectual property rules. Moreover, other LDCs on the cusp of graduation and LMICs who might want to emulate Bangladesh’s approach would find themselves in conflict with those rules as well.

Rahman then highlighted the unprecedented success of Bangladesh’s pharmaceutical market, which has been characterized over the past 40 years by an increasing domestic production of generic pharmaceuticals for export. Currently, the majority of Bangladesh’s exports go to high-income countries and its exports of pharmaceutical products make up 61 percent of all LDC exports globally. At the same time, it relies on imports for 95 percent of raw materials (“active pharmaceutical ingredients,” or API) that go into those medicines.

In order to achieve these developments, Rahman reported almost four decades of focused trade, industrial and intellectual property policy beginning with the 1982 Drugs (Control) Ordinance and National Drug Policy. Moreover, he noted that Bangladesh is not done yet – as recent strategies to build backward linkages in the economy and reducing import dependence on API through a new export policy and API and Reagents Industrial Park are already underway. Rahman concluded that when taken together, these policies have resulted in a robust pharmaceutical industry.

Rachel Thrasher, author of the 2021 book ‘Constraining Development: The Shrinking of Policy Space in the International Trade Regime,’ proceeded to detail how Bangladesh’s policies might run into obstacles at the World Trade Organization (WTO) and other free trade agreements and investment treaties. In the context of intellectual property rules, Bangladesh suspended pharmaceutical patenting in 2008, a move permitted for LDCs under the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). Once the country graduates, however, it will have to reinstate patenting for medicines, increase the current patent term from 16 to 20 years and make a number of other patent law changes in compliance with the TRIPS Agreement.

Outside of intellectual property, certain strategies, such as subsidies contingent on local content or export performance, bans on imports and more onerous requirements for foreign firms, are likely to violate rules under the General Agreement on Tariffs and Trade and the Agreement on Trade-Related Investment Measures. Moreover, Thrasher noted that free trade agreements outside of the WTO often ratchet up commitments and constrain policymaking even further.

Thrasher concluded that if Bangladesh’s policies conflict with global rules, the country could face international disputes or, worse, a chilling effect on policymaking that would undermine its development goals. This is true also for other LMICs and graduating LDCs who seek to mimic Bangladesh’s strategies. In light of the evidence, Thrasher urged ministers at the upcoming 12th Ministerial Conference at the WTO to favorably consider the proposal by Bangladesh and other LDCs for an extension of international support measures after graduation.

Implications of Bangladesh’s LDC graduation on TRIPS compliance

Carlos Correa then introduced the South Centre study by noting the impressiveness of the enormous progress of Bangladesh’s industrial development, especially in the pharmaceutical sector. Moreover, he emphasized the importance of maintaining that progress over the long-term to ensure sustainability in developing the pharmaceutical sector. In all, the South Centre study seeks to identify what Bangladesh needs to do in order to come into compliance with the WTO TRIPS Agreement.

Correa identified three primary conclusions:

  1. Bangladesh must implement the flexibilities permitted under the TRIPS Agreement into their
    domestic laws.
  2. Bangladesh must review and modernize its intellectual property system based on best practices
    in developing countries.
  3. Bangladesh must continue to advance by beginning to produce APIs even after graduation.

Nirmalya Syam, lead researcher on the South Centre project, introduced the research question, which asked: what is the possible impact of implementation of patent protection for pharmaceutical products after LDC graduation? He began by noting that Bangladesh’s life expectancy as well as infant and maternal mortality have greatly improved in recent years. At the same time, incidence of non-communicable diseases and tuberculosis have increased. Together, those diseases account for 67 percent of all deaths in the country, reinforcing the need for widespread access to affordable treatments.

Syam reviewed key characteristics of Bangladesh’s pharmaceutical industry – its breadth and depth with 150 local firms making up 90 percent of the market share and manufacturing 450 generic drugs for the public. He also highlighted some of the sector’s weaknesses, including that critical medicines for treatment of tuberculosis are not manufactured domestically and that an import dependency on technologically intensive products remains an issue. Given these weaknesses, Mr. Syam, noted that the most recent policies aimed at building up the pharmaceutical sector are quite new – initiating in 2018 – and in order for them to bear fruit, Bangladesh will need more time.

Syam concluded by pointing out the likely immediate implications for Bangladesh after graduation – coming into compliance with the TRIPS Agreement, beginning to grant pharmaceutical patents while facing a surge of patent applications and a decrease in the freedom of generic manufacturers to operate. All of these will have an adverse impact on affordability and access to medicines. The way forward, introduced by Correa earlier, must involve negotiating an extension of TRIPS-related support measures for some period after graduation, making full use of the extant flexibilities in the TRIPS agreement and introducing complementary industrial policies and government support to the pharmaceutical sector so that it can continue to grow and develop.

Ambassadorial Response: Two Extensions and a Call to Action

In response to these presentations, Ambassador Rahman noted the timeliness of this discussion, given the current challenges faced by many countries lacking access to essential COVID-19 products. He referred specifically to the ongoing challenges in Bangladesh’s pharmaceutical sector of relying too heavily on imports for APIs and the need for more bio-equivalence testing capacities and clinical research. At the moment, domestic medicines are made more expensive due to the high cost of these imported products.

Ambassador Rahman went on to discuss two distinct transition periods that Bangladesh has enjoyed and which will abruptly end upon graduation. In the first place, the general LDC TRIPS waiver (Article 66.1), which allows LDCs a transition period until July 2033, encompasses all of the TRIPS Agreement. The second transition period applies uniquely to pharmaceutical patenting and allows LDCs to not recognize pharmaceutical patents until January 1, 2034. In both cases, Bangladesh’s graduation will terminate that flexibility virtually overnight. During the most recent negotiations over the waiver, the LDC group was able to gain consensus on a 13-year extension of the LDC transition period, but, for the sake of coming to an agreement, was forced to eliminate the paragraph covering post graduation transitions.

In response to this, Ambassador Rahman and other LDC leaders have sought a general extension of international support measures for 12 years after graduation. Despite widespread support from developing countries at the WTO, influential industrialized WTO members oppose the extension because, they argue, not all LDCs need post-graduation flexibility, or at least not for all disciplines or sectors. Nevertheless, Ambassador Rahman underscored that requiring LDCs who graduate to negotiate extended transition periods on a case-by-case, sector-by-sector, or discipline-by-discipline basis is “cumbersome, arduous and impractical.”

Ambassador Rahman concurred with the findings of the studies presented – in particular highlighting the need for a review of Bangladesh’s intellectual property law to bring it into conformity with the TRIPS Agreement and to adequately take advantage of the flexibilities therein, to increase capacity for pharmaceutical patent examinations and to explore how other free trade agreements must be re-adjusted to allow support for Bangladesh’s pharmaceutical sector.

Ambassador Rahman concluded by noting that the COVID-19 pandemic has destabilized the whole world. It is well established that LDCs, including those on the path toward graduation, have been hit hard in the downturn, and these countries will need policy space to access various technologies, resources and tools to fight the pandemic. Finally, he urged once more that the LDCs’ submission for an extension of international support measures would find broad support by the WTO members at the 12th Ministerial Conference of the WTO.

Read the GDP Center Working Paper