This presentation paper focuses on the treaty on biodiversity which was written in October 2010 in Nagoya, Japan. The presentation highlights how the Nagoya Protocol is expected to affect the pharmaceutical industry in the future. It also highlights the potential impact of the protocol on the procurement strategies of pharmaceutical companies from biodiversity-rich countries.

1. MARCH | 2011
Copyright © Beroe Inc, 2011. All Rights Reserved 1
Nagoya Protocol and Its Implications
on Pharmaceutical Industry

2. Introduction
This white paper focuses on the treaty on biodiversity which was written in October 2010 in Nagoya, Japan.The paper
highlights how the Nagoya Protocol is expected to affect the pharmaceutical industry in the future. It also highlights
the potential impact of the protocol on the procurement strategies of pharmaceutical companies from biodiversity-rich
countries.
The Nagoya Protocol and Biodiversity
The Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits is a landmark
treaty that was devised keeping in mind the increasing loss of biodiversity on Earth. It is a supplementary agreement
to the earlier convention on biological diversity and provides a legal framework for the objectives of the convention.
The Nagoya Protocol and Biodiversity
The Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits is a landmark
treaty that was devised keeping in mind the increasing loss of biodiversity on Earth. It is a supplementary agreement
to the earlier convention on biological diversity and provides a legal framework for the objectives of the convention.
Copyright © Beroe Inc, 2011. All Rights Reserved 2
Factors That
Led to the
Nagoya Protocol
Drug makers have to disclose the origin of
genetic resources during patent applications.
The benefit and sharing model is applicable
for all plant and animal resources that can be
used in the development of drugs.
Demand for a legally binding protocol
from developing nations and biodiverse
rich nations
The clauses on benefit sharing between
parties are vague in the 1992 Convention
on Biological Diversity. No legally binding
clause was included in this treaty.
To detect illegal exports of genetic
materials
Ensure benefit
sharing when
genetic resources
are provided by
the host country
to the sourcing
organization.
Creation of a
protocol on the
equitable sharing
of the benefits
that arise from
the use of genetic
resources.
Establish a more
stable and singular
focal point to aid
organizations in
accessing genetic
resources.
Identification of
new mechanisms
to finance the
conservation of
nature.
Formation of a
strategic plan that
strives to conserve
biological diversity
until the year 2020.
To provide more
clarity on issues
pertaining to genetic
resources
To eliminate
biopiracy
To ensure universal
acceptance of the ABS
model
To ensure ABS is
implemented in a
timely and fair manner

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Access and Benefit Sharing Model
The implementation of the access and benefit sharing model involves three stages:
Prior Informed Consent for Access to Genetic Resources:
The access and benefit sharing model requires that every organization sourcing genetic resources from a biodiversity-
rich country obtain prior consent from the host country before collecting resources. Consent is provided by a single
focal point representing the country, which acts as the intermediary between the organization and the indigenous
community that owns the resource.
Mutually Agreed Terms for Access and the Use of Genetic Resources:
Mutually agreed terms that contain the conditions and provisions for access and benefit sharing between the user,
the provider, and other relevant stakeholders is drawn up. Both parties must agree to the terms before resources are
collected by the user.
Benefit Sharing from the Use of Genetic Resources:
Benefit sharing may involve monetary or non-monetary benefits that arise from access to genetic resources or
associated traditional knowledge. If the source of a genetic resource is unknown, a single common trust fund is created
in collaboration with all the owners of the genetic resource.The payment of benefits is made from this global fund if the
origin of the species is unknown or if a transboundary exists. Funds obtained must be used to support the conservation
and sustainable use of biodiversity.
Type of Benefit
Monetary Benefits:
Monetary benefits are a percentage of the revenue earned from the sales of a final product derived from the genetic
resource collected by the user from the provider.These benefits also include the lump sum amount initially paid to gain
access to the material.
2000:WIPO Intergovernmental
Committee on Intellectual Property
and Genetic Resources,Traditional
Knowledge, and Folklore
1992: Convention on
Biological Diversity
1994:TRIPS Agreement harmonized
national systems with regard to
intellectual property rights.
2010: Nagoya Protocol
on Access to Genetic
Resources and the Fair
and Equitable Sharing of
Benefits Arising from
Their Utilization
Sharing of Benefits
Arising from Their
Utilization
2001: Doha Declaration
Commitment on
sustainable practices used
by multi lateral trading
systems
2002:World Summit on
Sustainable Development
and practices
Access and Benefit Sharing Timeline
EventsLeadingUptoNagoya
Time
2002: Bonn Guidelines on Access to
Genetic Resources and the Fair
and Equitable Sharing of Benefits
Arising out of Their Utilization

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Non-monetary Benefits:
Non-monetary benefits include benefits arising from the process of research and development,such as capacity building
and technology transfer through infrastructure, expertise and know-how building, and training through joint research.
Process benefits that arise from the sustainable use of genetic resources also fall under non-monetary benefits.
Biodiversity-rich Regions of the World
The following biodiversity-rich countries are likely to gain the most from the Nagoya Protocol.
Latin America Asia Africa Australia & Oceania
Brazil Philippines Madagascar Australia
Colombia Indonesia Democratic Republic of Congo Papua New Guinea
Ecuador Malaysia South Africa
Mexico India
Peru China
Venezuela
Importance of Biodiversity to the Pharmaceutical Industry
The pharmaceutical industry has had a long and fruitful relationship with biodiversity.Large pharmaceutical companies
generate close to USD 250 billion annually from drugs directly derived from biodiversity.Taxol,a blockbuster drug that
was discovered by scientists of the US government and developed by Bristol Myers Squibb Co. in 1992, contributed
close to USD 9 billion between 1992 and 2000. This drug is derived from the bark of yew trees.
Name of Drug Derived from Properties and Functions
Exenatide
Gila Monster Lizard
Spit
Used as a substitute for insulin and to promote weight loss.
Artemesinin Artemisia annua Used to treat malaria.
Captopril Brazilian Viper Used to lower blood pressure.
Calcimar and Miacalcin Coho Salmon Used to treat osteoporosis.
IND TM 601 Israeli Yellow Scorpion
Observed to attack malignant brain tumours (known as
glioma tumours) that are responsible for two-thirds of brain
cancer cases, without harming healthy cells.
Methanolic Extracts Ruta Graveolens
Being tested for the treatment of colon, breast, and prostate
cancer.
Medium High biodiversityHigh biodiversity Low biodiversityMedium biodiversity

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In 2010, just over 100 natural product based molecules were in clinical trials, a 30% drop compared to 2000 levels.
Approximately 80% of pharmaceutical drugs were derived from natural product origins in 1990; by 2005, however,
this figure fell to around 50%. In 2010, the natural products mix in the pharmaceutical industry was estimated to be
40%. Currently, 62% of cancer drugs approved by the US Food and Drug Administration come from, or are modelled
based on, natural products. For example,Taxol is used to treat breast and ovarian cancer.
Changing Dynamics of New Chemical Entities
Natural Products Used in Clinical Trials
Pharmaceutical Drugs – Natural Products vs. Synthetic Products
Before 1990s 2002-2005 2010
20%
50% 50%
60%
40%
80%
38%
18%
10%
9%
8%
17% Cancer
Anti-infective
Neuropharmocological
Cardiovascular/
Gastrointestinal
Inflammation
others
48%
27%
11%
11%
3%
Plants
semi-synthetic
bacterial
animal
fungal
14%
26%
9%
50%
1%
Natural
Derived from a
Natural Source
Biological
Synthetic
Others
5%
23%
14%
54%
4%
Natural
Derived from a
Natural Source
Biological
Synthetic
Others

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In 2010, more than 40% of all the new chemical entities
were obtained from natural sources. Plants are the major
source for drugs of natural origin in the clinical phase.
Nearly 48% of drugs in the clinical phase are derived
from plants.
Drugs currently in the pipeline that are derived from
natural sources are mostly cancer and anti-infective
medicines.These two therapeutic areas account for 56%
of all drugs of natural origin in clinical trials.
Impact of the Nagoya Protocol on the
Pharmaceutical Market
The Nagoya Protocol, especially the Access and Benefit
Sharing clause, calls for systems to be put in place.
These systems are expected to drive the costs incurred
by pharmaceutical companies during the drug discovery
phase.
• TheNagoyaProtocolcouldhaveanadverseimpactonthe
pharmaceutical industry. Many companies feel that the
Access and Benefit Sharing clause will increase product
development costs and complicate the drug discovery
phase. According to the protocol, organizations will
have to pay a significant amount of their revenue and
royalties to indigenous communities and host countries
for the drug they develop from genetic resources.
• The revised patent system will also add to the cost of
drug development. Due to the rules and regulations
laid down by the Nagoya Protocol, organizations would
have to execute joint patents with the communities from
whom they source resources. For multiple ownership
cases, the patenting policy is even more obscure.
Present Status of the Nagoya Protocol
Each country must ratify the Nagoya Protocol;in addition,
the treaty must be passed by a country’s legislative body.
According to the Nagoya Protocol, certain restrictions
have to be followed by all organizations that use
genetic resources from other countries. For example,
each organization is required to set up biodiversity
indicators.These biodiversity indicators should consist of
a combination of various biodiversity resources that are
used by organizations and measure the company’s impact
on the environment.
Implementation Issues:
• Presently, there are no coherent biodiversity indicators
that can be used to measure the corporate impact on
biodiversity.
• It is difficult to measure the performance of small- to
mid-sized companies with regard to ecosystems usage.
• The corporate sector has not yet embarked on the
large scale incorporation of sustainable biodiversity
practices.
Examples of Biodiversity Indicators
Note: It has been suggested that close to 20 biodiversity
factors should be taken into account while establishing
biodiversity indicators for each company.
Signatories of the Nagoya Protocol
The Nagoya Protocol is not retroactive and does not affect
already existing products.The protocol will apply only for
products in the pipeline. Algeria, Brazil, Colombia,Yemen,
Netherlands, Denmark, Sweden, Japan, Mexico, and
Rwanda have already signed the Nagoya Protocol. It will
be open to new signatories from March 7, 2011 to March
6, 2012 and will come into effect within 90 days of the
fiftieth ratification of the Nagoya Protocol.
Religious Significance
of the Location
Water Filtration
Eco Tourism
Soil Formation
Cultural Services
Goods
(such as timber)
Nutrient Recycling

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Access and Benefit Sharing Industry Practices
PRE-ACCESS
• The user (i.e. the enterprise or researcher) interested in using the natural resource requests access to the country
that provides the genetic resource through prior informed consent (PIC).
• The request should be made to a central focal point designated by the country
• The provider of the resource and all local communities must give prior consent with full knowledge of the targeted
use of the genetic resource.
• Mutually agreed terms (MAT) are established between the two parties that define how the benefits will be shared
with the exporting country/ community.
• Authorization is issued by a national authority of the exporting country.
• Information on access and benefit sharing is communicated to the clearing house.
• A legally binding ABS contract is made between the provider and user of the genetic resource.
BENEFIT SHARING
• The user of the genetic resource has to abide by the MAT and conditions.
• The user party has to establish and maintain appropriate communication with all stakeholders at different levels.
• All communities and indigenous people have to be involved in the research.
• The user must provide all appropriate information and document it according to PIC/MAT and conditions. It must
also ensure compliance with PIC/MAT and other expectations, including benefit sharing.
• The user must ensure timely provision of benefits according to the schedule outlined in the PIC/MAT contract.
• Compliance with ABS standards is necessary for many companies to secure finance, certify products, and access
markets, as well as to be recognized for ethical and sustainable practices.
• The user must verify with stakeholders that obligations and expectations are met.
• A breach of regulations can lead to fines or the loss of future concessionary rights.
PROVIDER OF
NATURAL RESOURCE
USER OF NATURAL
RESOURCE

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Parties
Time
Period
Details of the MTA Impact
Tropical
Botanic
Garden and
Research
Institute
(TRGRI) and
the Kani tribe
in India
1997 A mutual agreement was made between the two parties
for the cultivation of Trichopus zeylanicus, which
contains anti-fatigue and energetic properties.
ABS Specifications:
•2% license fee to be paid to TBGRI by the phyto
medical company.
•Benefits to be equally distributed between the Kani
tribe and TBGRI.
•The remainder of the license fee will be put into
the Kani tribe’s trust fund (Kerala Kani Samudaya
Kshema Trust).
The model failed due to:
•Unrelenting bureaucracy
•Policy vacuum
•Lack of appropriate legal
obligations between the
parties.
SAN tribe,
CSIR of
South Africa,
Phytopharma,
Pfizer, and
Unilever
1996 to
2008
The parties agreed to conduct research on Hoodia
gordonii, traditionally used by the San tribe as an anti-
appetizer.
ABS Specifications:
•The San tribe will receive 8% of all milestone
payments CSIR receives from Phytopharma.
•CSIR will receive 6% of all royalties once the drug is
commercially developed by Phytopharma.
•The San trust will receive USD 75,000 as an initial
benefit-sharing payment.
The arrangement failed
because:
•The drug’s side effects
were dangerous.
•Unilever lost more than
£20 million in four years
doing research on Hoodia.
•There was a huge rise
in drug prices due to
the hype created for the
development of the drug.
The Kenya
Wildlife
Service
(KWS),The
International
Centre for
Insect
Physiology
and Ecology
(ICIPE), and
Novozymes
and Diversa
(Verenium)
Corporation
2007 This deal was made for a period of five years for the
cultivation of the enzyme Pulpzyme, which is developed
by the microorganisms protected by KWS.
ABS Specifications:
•Royalties will be paid to KWS.
•The royalties paid will be in the range of 0.5-10%.
•Novozymes will transfer technology and provide
training to Kenyan students throughout the agreement
period.
•All intellectual property rights and patents are to be
co-owned by both parties.
•Benefits will be equally shared by ICIPE and KWS.
This arrangement was
successful because:
•KWS acted as the national
focal point for Kenya.
By going through KWS,
Novozymes successfully
conducted the agreement.
•Prior informed consent
was obtained from KWS,
which represented the
Kenyan government.
•The microbial discoveries
were done by KWS
researchers trained by
Novozymes employees.

9. Copyright © Beroe Inc, 2011. All Rights Reserved 9
Conclusion
Time Period
The effect of the Nagoya Protocol will take 2-4 years to be
felt as the protocol cannot be implemented retroactively.
Increase in Costs during the Drug Development
Stage
The costs incurred by drug companies, especially during
the drug development phase, will increase due to the
Access and Benefit Sharing clause.
Corruption
The implementation of ABS in countries like India,
Indonesia,and Brazil might lead to difficulties in procuring
biological material for RD operations as corruption and
red-tapism are already major concerns in these nations.
Biodiversity Indicators Bioprospecting
As companies implement biodiversity indicators, which
would limit the use of biodiversity, organizations will have
to restrict their supply chain and production processes to
adhere to the protocol.
The Nagoya Protocol could facilitate bioprospecting as the
governments that own the resource can provide companies
with clear guidelines for bioprospecting.
Royalties
Another major challenge pharmaceutical companies will
face in the future is patent rights. Companies are likely to
incur costs with regard to royalties as companies might
have to pay 2-10% to the community that possess the
genetic material.
Types of ABS
Companies prefer to provide technology transfer and
advanced training rather than monetary benefits when
adopting ABS.
RD Patenting Production
Increased risk of
corruption and
red-tapism in
developing
countries
Increase in the cost of sourcing
genetic resources
More complications to patent the final
drug due to multiple players and
numerous stages.
Increase in production costs due to
excess costs incurred during the
procurement of resources.
Sharing the royalties of patents for the
final drug would increase costs.
Lack of uniformity among various
countries over ABS arrangements.
Increase in the
time required for
bioprospecting
and sourcing
Impact of the Nagoya Protocol on Focus Areas

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The information contained in this publication was derived from carefully selected sources.Any opinions expressed reflect the current judgment
of the author and are subject to change without notice. Beroe Inc accepts no responsibility for any liability arising from use of this document
or its contents.
For more information, please contact info@beroe-inc.com.
Author:
Kurian Kurien | Senior Research Analyst
Aloke Das | Research Analyst
Source: RiS.org, Food and Agricultural Organization of the United Nations, business-biodiversity.eu, Union for Ethical Bio Trade, cbd.int
Copyright © Beroe Inc, 2011. All Rights Reserved 10