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Biodiversity and business: coming to terms with the ‘grand bargain’
KERRY TEN KATE AND SARAH A. LAIRD*
Biological diversity, the variability among living organisms and the ecosystems of which they are part, underpins our very existence. It provides essential ecosystem services such as the purification of water, prevention of soil erosion and floods, and regulation of the climate. Furthermore, ‘genetic resources’— biological materials of actual or potential value containing functional units of heredity1—form the basis of a significant proportion of the world’s economic activity. A crude estimate of combined annual global markets for a portion of the products derived from genetic resources lies between US$500 billion and US$800 billion (see table 1).2 The world’s biological diversity is distributed largely in inverse proportion to scientific and technological capacity.3 At present, biologically diverse countries with developing economies and limited scientific infrastructure rarely participate in the rapid scientific and technological advances that make new and varied use of their genetic resources, but many of them aspire to do so. Companies and research institutions based in developed countries seek diversity and novelty in the genetic resources they study and use, and many look outside their borders * This article draws upon research conducted with the support of the European Commission, and published in Kerry ten Kate and Sarah A. Laird, The commercial use of biodiversity: access to genetic resources and benefitsharing (London: Earthscan, 1999; available from ). This book provides a more comprehensive analysis of commercial use of genetic resources, and the private sector and the Convention on Biological Diversity. 1 Article 2 of the CBD defines ‘genetic resources’ as ‘genetic material of actual or potential value’ and ‘genetic material’ as ‘any material of plant, animal, microbial or other origin containing functional units of heredity’. 2 The broad range in these estimates results from the challenge of calculating total global figures for highly complex and varied markets, such as agriculture and biotechnology, and of identifying the extent of the use of genetic resources in other markets, such as pharmaceuticals and crop protection. The figures do not account for subsistence or locally traded products, which are not included in national and international statistics; nor do they incorporate other industry sectors that use genetic resources in other ways. They do not distinguish between the costs associated with access to genetic resources and those involved in product research and development, marketing, and manufacture, and consequently offer little indication of what companies are willing to pay for access to genetic resources. Although these markets are sizeable, the genetic resources required for research and development can be obtained in a number of ways that do not necessarily require payment or trigger benefit-sharing negotiations. For all these reasons, global markets do not translate directly into benefits for the providers of genetic resources. 3 C. Macilwain, ‘When rhetoric hits reality in debate on bioprospecting’, Nature 392, 9 April 1998, pp. 535–41.
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Kerry ten Kate and Sarah A. Laird Table 1: Annual global markets for some products derived from genetic resources Product area
Annual sales (US$bn) Low est. High est.
Pharmaceuticals Botanical medicines Agricultural produce of which: Commercial agricultural seed Crop protection products Biotechnology, other than health and agriculture Personal care/cosmetic products
75 20 300+
150 40 450+
30 0.6
30 3
60 2.8
120 2.8
Rounded total
500
800
Source: K. ten Kate and S. A. Laird, The commercial use of biodiversity: access to genetic resources and benefit-sharing (London: Earthscan, 1999).
for new leads. The need for access to genetic resources by industry on the one hand, and, on the other, the benefits sought by biologically diverse countries, asked by the international community to conserve biodiversity, set the scene for an exchange. The 1992 Convention on Biological Diversity (CBD) reflects a commitment by the participating governments to facilitate access to genetic resources in return for a fair and equitable sharing of benefits such as technology transfer (CBD Article 1), an exchange that has been described as a ‘grand bargain’.4 The objectives of the CBD are the conservation of biological diversity, the sustainable use of its components, and the fair and equitable sharing of the benefits arising from the use of genetic resources, including through access to genetic resources, technology transfer and funding. Article 15 of the Convention requires governments to facilitate access to genetic resources, but it also states that the authority to determine access rests with national governments, and is subject to their prior informed consent and to the fair and equitable sharing of benefits on mutually agreed terms. The CBD itself is a framework convention. In the field of access and benefit-sharing, its implementation at the national level is proceeding at quite a pace. Laws and other policy measures aimed at securing fair partnerships with researchers and with companies have been introduced or are under development in over 40 countries, and more are 4
M. A. Gollin, ‘An intellectual property rights framework for biodiversity prospecting’, in W. V. Reid, S. A. Laird, C. A. Meyer, R. Games, A. Sittenfeld, D. H. Janzen, M. A. Gollin and C. Juma, eds, Biodiversity prospecting: using genetic resources for sustainable development (Washington DC: World Resources Institute, 1993).
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Biodiversity and business set to follow.5 These regulate access to genetic resources and require the sharing of benefits that arise from their use, such as publications, training, research results and capacity-building, as well as monetary benefits such as fees, royalties and ‘milestone payments’ made at key stages in the development process, in addition to the initial fees for samples or grants to cover research. The CBD and the national laws on access introduced to implement it have an important bearing on the work of any person or company seeking access to genetic resources of any kind, whether for academic study or for commercial research and development. These measures are attempting to redraw ethical and legal norms established over a long history of trade in genetic resources, and aim to balance the needs of both technologically and biologically endowed countries. The practical implementation of these principles poses an enormous challenge for the 176 parties (and the regional economic integration organization of the EU) that have ratified the CBD, and for the many sectors of industry that need access to genetic resources for product discovery and development. Together, they must find workable rules and procedures that reflect the rights of sovereign states, communities, research institutions, individuals and companies but deliver partnerships that are ‘fair and equitable’ in the context of the risks and rewards of product development. The rules and procedures need to be speedy, simple and efficient. A number of factors conspire to make this difficult to achieve. To begin with, despite its importance to humankind, the biological diversity at the heart of the exchange is being eroded. Conservative estimates place current extinction rates for well-documented groups of vertebrates and vascular plants at 50–100 times larger than the expected natural rates.6 Secondly, the countries, institutions, communities and companies involved in the exchange of genetic resources particularly by multinational companies have extremely different perceptions about the relative value of those resources and of the information, innovation, and research and development that are needed for product discovery and development. The gulfs that divide these different expectations often block the successful conclusion of partnerships for scientific research and commercialization. Although there is a wide range of different perspectives, a caricature of the different perspectives can be seen as having two extremes. On the one hand, some feel that the legal and policy environment does not adequately ensure prior informed consent and adequate benefit-sharing, any 5
Countries that are developing access and benefit-sharing measures include Argentina, Australia (at the Commonwealth level and in the states of Western Australia and Queensland), Belize, Bolivia, Brazil, Cameroon, Colombia, Costa Rica, Ecuador, Eritrea, Ethiopia, Fiji, The Gambia, Ghana, Guatemala, Hungary, India, Indonesia, Kenya, Republic of Korea, Laos PDR, Lesotho, Malawi, Malaysia (including the State of Sarawak), Mexico, Mozambique, Namibia, Nicaragua, Nigeria, Papua New Guinea, Peru, Philippines, Russian Federation, Samoa, Seychelles, Solomon Islands, South Africa, Tanzania, Thailand, Turkey, Uganda, United States of America, Venezuela, Vietnam, Yemen and Zimbabwe. In addition to the regional law introduced by the five member states of the Andean Commission (Bolivia, Colombia, Ecuador, Peru and Venezuela), the Association of South-East Asian Nations, the Organization of African Unity and the South Pacific Regional Environment Programme are also exploring the possibility of regional access measures (personal communication, Lyle Glowka, February 2000). 6 World Resources Institute, Biodiversity, (1999); A. C. Janetos, ‘Do we still need nature? The importance of biological diversity’, Consequences 3: 1, 1997.
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Kerry ten Kate and Sarah A. Laird commercial use of genetic resources is ‘biopiracy’.7 On the other hand, some believe that countries have an unrealistic and inflated estimation of the value to industry of access to their genetic resources, and fear that the ‘grand bargain’ may be misconceived, because there is insufficient commercial demand for access to genetic resources to generate the benefits that will in turn create the incentive to conserve biological diversity or to help countries develop.8 A third problem is that a number of features of the transfer of genetic resources and the discovery and development of products make the monitoring and enforcement of access and benefit-sharing agreements extremely difficult.9 Material often travels from countries of origin to private sector concerns in other countries through a complicated route, passing through many hands from collection to commercialization, with value being added at each stage. In many cases, the product which is commercialized is not physically linked to the original genetic resources collected; for example, it may have been manufactured from scratch on the basis of modifications of chemical structures originally found in nature. Consequently, it is difficult to track the exchange of genetic resources and link it to the sharing of benefits. This lack of transparency, compounded by the common requirement for confidentiality in commercial partnerships, does nothing to dispel the high levels of distrust prevalent between potential partner countries, companies and institutions. This article will explore whether partnerships between research institutions, companies, governments and communities can promote sustainable development, or whether the ‘grand bargain’ envisaged by the CBD is nothing more than a utopian ideal that inflates expectations and stands in the way of science and realistic business. Markets for genetic resources in selected sectors: an overview Rapid scientific developments over the past few decades in the fields of biology, chemistry, genomics and information technology have revealed a vast range of new targets for the development of medicines and agricultural products, and have transformed the processes of discovery and development. Biological discoveries that would once have taken years can now be completed in days, thanks to new technologies such as combinatorial chemistry, ultra-highthroughput screening and ‘laboratories on a chip’. In response to these scientific and technological developments, a constellation of companies, nearly as diverse as the genetic resources on which they work, has arisen in a shifting pattern of 7
V. Shiva, Biopiracy: the plunder of nature and knowledge, (Devon : Green Books, 1998); Rural Advancement Foundation International, ; Genetic Resource Action International, . 8 For commentary on the range of perceptions discussed here, see ‘The different perspectives’, K. ten Kate and S. A. Laird, The commercial use of biodiversity: access to genetic resources and benefit-sharing (London: Earthscan, 1999), p. 6. For a review of this book see p. 375 in this issue of International Affairs. 9 Bronwyn Parry, ‘The fate of the collections: social justice and the annexation of plant genetic resources’, in Charles Zerner, ed., People, plants and justice: the politics of nature conservation (New York: Columbia University Press, 1999); ten Kate and Laird, The commercial use of biodiversity.
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Biodiversity and business Table 2: Sales of products derived entirely from genetic resources Product area
Global sales, 1997 (US$bn)
Botanical medicines Ornamental horticultural produce Agricultural produce of which: Commercial agricultural seed
20 16–19 300–450+ 30
Table 3: Sales of products derived in part from genetic resources Product area
Global sales, 1997 (US$bn)
Pharmaceuticals Personal care and cosmetics Crop protection a
300 55 30
Sales of natural origin (US$bn) 75a 2.8 0.6–3
Using a conservative 25% estimated proportion.
partnerships within an increasingly globalized economy. Discernible among this complex pattern are trends towards, on the one hand, consolidation through mergers and acquisitions, and on the other, a proliferation of small companies that specialize in aspects of discovery or development. Thus ‘life science titans’ such as Monsanto, Novartis and Aventis evolve alongside a host of small research biotechnology companies to which, particularly in the area of health care, the larger companies ‘outsource’ an increasing proportion of their research. There is enormous variety within and between industry sectors in market size and growth, strategies for research and development, and the cost, time and probabilities of success involved in developing commercial products from natural product samples. The richness and complexity of the legal, political, scientific and socio-economic framework for the commercial use of biodiversity does not lend itself to generalities and simple conclusions. However, we will endeavour to draw some broad conclusions about the extent of markets and nature of industrial demand for access to genetic resources.10 In some sectors—such as the seed industry, horticulture and the botanical medicines industry—all products sold are derived from genetic resources (see table 2). In other sectors the position is rather different. Pharmaceuticals, personal care products and cosmetics, and crop protection products can be discovered, developed and manufactured in a number of different ways, not all 10
For a more complete review of the method for arriving at the figures given here, and necessary caveats in applying them, see ten Kate and Laird, The commercial use of biodiversity.
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Kerry ten Kate and Sarah A. Laird of which make use of genetic resources. Thus only a proportion of the products in each of these sectors can be regarded as derived from genetic resources. Estimates for total global gross sales in these industries, and the proportion of product sales that is of natural origin, are shown in table 3. For example, in the field of pharmaceuticals, one study found that over 25% of US prescriptions dispensed in 1973 contained active ingredients derived from plants, while 13.3% and 2.7% were derived from microbial and animal sources, respectively.11 These proportions were constant for the 15-year period 1959– 73. In a 1997 study, the top 150 proprietary drugs from the US National Prescription Audit were analysed for the period January–September 1993.12 (The audit is a compilation of virtually all the prescriptions filled in the United States during this time, and the data are based on the number of times a prescription was filled.) The researchers found that 57% of the prescriptions filled contained at least one major active compound ‘now or once derived or patterned after compounds from biological diversity’. Another team analysed data on new drugs approved by either the US Food and Drugs Agency or comparable entities in other countries between 1985 and 1995, focusing on the areas of cancer and infectious diseases.13 They found that of the 87 approved cancer drugs, 62% are of natural origin or are modelled on natural product parents; for the 299 anti-cancer drugs in pre-clinical or clinical development, the figure was 61%. Others have demonstrated that the contribution of natural products to sales in the world’s top pharmaceutical companies ranged from 10% to more than 50%.14 Of the 25 best-selling drugs worldwide in 1997, 42% of sales came from biologicals, natural products,15 or entities derived from natural products, with a total value of US$17.5 billion.16 Using a conservative estimate that a quarter of all pharmaceuticals are derived from genetic resources, the annual market for natural product pharmaceuticals is US$75 billion. The global agrochemical market (including herbicides, insecticides, fungicides, plant growth regulators, rodenticides and molluscicides, but excluding fertilizers) was US$30.2 billion in 1997. Seven per cent of these crop protection products were developed from research programmes involving access to genetic resources (although the resources may have been obtained from within the company’s own collections); however, these products account for only around 2% of the 11 12
13 14 15
16
N. Farnsworth and R. W. Morris, American Journal of Pharmacology 148, 1976, pp. 46–52. F. Grifo, D. J. Newman, A. S. Fairfield, B. Bhattacharya and J. T. Grupenhoff, ‘The origins of prescription drugs’, in F. Grifo and J. Rosenthal, eds, Biodiversity and human health (Washington DC: Island Press, 1996). G. M. Cragg, D. J. Newman and K. M. Snader, ‘Natural products in drug discovery and development’, Journal of Natural Products 60: 1, 1997, pp. 52–60. D. J. Newman and S. A. Laird, ‘The influence of natural products on 1997 pharmaceutical sales figures’, in ten Kate and Laird, eds, The commercial use of biodiversity. ‘Biologicals’ or ‘biopharmaceuticals’ are defined as entities that are proteins or polypeptides either isolated directly from the natural source or more usually made by recombinant DNA techniques followed by production using fermentation. ‘Natural products’ include entities that, though occasionally manufactured by semi-synthesis or even total synthesis, are chemically identical to the corresponding pure natural products Newman and Laird, ‘The influence of natural products on 1997 pharmaceutical sales figures’.
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Biodiversity and business Table 4: Annual market for biotechnology products Product area
Value of market (US$bn)
Environmental biotechnology Industrial enzymes and biocatalysts, of which: Industrial enzymes Biocatalysts Diagnostics,a of which: Non-health use (
