In June, Tesla opened a treasure trove of intellectual property with a simple blog post by Founder and CEO Elon Musk. He explained that Tesla’s patents were originally intended to protect against competition from large automakers but that patents had become a roadblock to the company’s mission of advancing sustainable transportation. “If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal,” Musk wrote.
This decision was remarkable, as it put Tesla’s long-term vision to provide infrastructure and technology for sustainable transportation over ostensible short-term wins brought on by intellectual property protections. Musk recognized that reducing the barriers to entry in the electric car market for other automakers is strategic: As a TechCrunch article pointed out, better electric vehicles overall could convince more consumers to buy the cars, and Tesla is a leader in the marketplace.
Recently I’ve conducted several sustainability strategy projects for large pharmaceutical companies. I wondered whether there are parallels between Musk’s open-source decision and how pharmaceutical companies—which include biotechnology, specialty bio-pharma, and biologics—view intellectual property policies with respect to their missions. Given the onslaught of legislative and public pressure for greater transparency among pharmaceutical companies, how can the industry respond in a strategic way without compromising its most valued assets?
Increasing Demand for Transparency from Regulators and Stakeholders
When I consider the major cost centers and value drivers for the industry, research and development quickly comes into focus. Pharmaceutical companies live and die by the depth and uniqueness of their R&D pipelines and their ability to extend the longevity of exclusive, branded drugs on the market. Attempts by governments to make R&D more transparent or to promote low-cost, generic manufacturing are met with strong opposition. It’s no surprise that the industry is especially litigious in protecting its investments.
It’s also not news that governments around the world are pushing companies to open R&D and relax intellectual property protection policies to make the research process more efficient, promote patient safety, and expand access to life-saving medicines.
In July 2013, the Pharmaceutical Research and Manufacturers of America and the European Federation of Pharmaceutical Industries and Associations released Principles for Responsible Clinical Trial Data Sharing. Although the principles were a clear articulation of the industry’s voluntary commitment to share valuable data from phase 3 clinical trials, the European Union still passed a regulation in April that requires companies to make all of their European clinical trial data available. And in October, the EU’s European Medicines Agency announced a plan to release clinical reports, which, despite serious criticisms, advances transparency in clinical trial data-sharing.
The recent experience of Novartis in India illustrates the industry’s sustained challenges around intellectual property protections. In April 2013, India’s Supreme Court upheld an earlier decision to reject Novartis’s application for a patent for Glivec, a cancer-fighting drug. Novartis’s experience mirrors that of other companies in India, including Bayer and Roche.
All this is to say that the industry is feeling pressure, a trend likely to continue. Cash-strapped governments with clear public health needs will question the societal value of long-term patent protections that keep prices high and strict intellectual property protections that restrict access to critical information on drug efficacy.
Responses from Pharmaceutical Industry Leaders
Before returning to how Tesla’s decision could guide pharmaceutical companies on transparency, we can look to the industry itself for leadership examples.
In 2011, after several challenges to the medical benefits and safety of Medtronic’s bone graft product, Infuse, the company asked the Yale Open Data Access (YODA) project to evaluate the product and its effects. YODA found that studies commissioned by Medtronic had disproportionately shared the positive benefits while underplaying product risks. While the YODA evaluation could have been interpreted as damning evidence against the FDA’s approval of Infuse, Medtronic maintained that such transparency ultimately led to better patient outcomes, which aligns with its corporate mission.
In January 2014, Johnson & Johnson decided to release data on its clinical trials through YODA. The value of this decision is unclear and may not be completely understood for many years, but other companies are following suit. Bayer, Boehringer Ingelheim, GlaxoSmithKline, Eli Lilly, Novartis, and others have committed to participate in the ClinicalStudyDataRequest, an online platform that provides researchers with access to patient-level data from clinical studies.
These leading companies may not have a crystal ball to predict the outcomes of their increased transparency, but they do see the importance of getting ahead of impending legislation. Whether these companies are trying to make nice with regulators to ease the mandatory rules for data-sharing or are just preparing for the worst, they are positioning themselves well ahead of their peers. And they are also truly living up to their corporate missions.
Learning from Tesla: Aligning Mission and Business Practices
Most pharmaceutical companies’ missions—including those for GlaxoSmithKline, Merck, and Roche—emphasize the importance of innovation, science, or R&D and focus on helping people live healthier and longer. By making clinical data available, pharmaceutical companies allow researchers to develop life-saving treatments faster, more cost effectively, and with a higher degree of safety.
Balancing the corporate mission against the perceived risk of lowering barriers to proprietary information is exactly how Musk illustrated transformative industry leadership. His example raises three questions that the pharmaceutical industry should consider:
- How does your mission align (or misalign) with your intellectual property protection policies?
- How will the inevitability of greater transparency impact your industry’s structure?
- How could leadership on transparency issues create competitive advantage for your firm, given the changes in your industry?
While it is up to each company to ask and answer these questions, we can draw three immediate and transferable lessons from the discussion above. First, true leadership on this issue will require a change in current internal policies and practices. Second, the threat of government-mandated transparency will require a proactive strategy on behalf of companies in the industry. And finally, companies must seek out a new set of partners, as in the case of Johnson & Johnson and YODA, to make progress in an ambitious and considered way.
Musk’s perspective on industry leadership in a recent Bloomberg Businessweek article puts a conclusive point on the issue: “You want to be innovating so fast that you invalidate your prior patents…It’s the velocity of innovation that matters.” Transparency should not be considered as a risk to be managed. Rather it is a tool for pharmaceutical companies to accelerate research and development of life-saving medications in the service of their missions.