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Biodiversity and Conservation 9: 15211541, 2000.

2000 Kluwer Academic Publishers. Printed in the Netherlands.

From Norway to Novartis: cyclosporin from


Tolypocladium inflatum in an open access
bioprospecting regime

HANNE SVARSTAD1, *, HANS CHR. BUGGE2 and


SHIVCHARN S. DHILLION3
1 Centre for Development and the Environment, University of Oslo, PO Box 1116, Blindern, N-0317 Oslo,
Norway; 2 Department of Public and International Law, University of Oslo; 3 Department of Biology and
Nature Conservation, Agricultural University of Norway & Centre for Development and the Environment,
University of Oslo; *Author for correspondence (e-mail: hanne.svarstad@sum.uio.no; fax: +47 22858920)

Received 26 April 1999; accepted in revised form 28 January 2000

Abstract. The Convention on Biological Diversity (CBD) introduces a new regime of source countries
national sovereignty over genetic resources, in which benefit sharing is a central factor. This article shows
how Tolypocladium inflatum was collected in Norway in 1969 within an open access regime implying that
there is no benefit sharing with the source country from Novartis present sales of the derived medicines
based on cyclosporin. We estimate source countrys loss of benefits in comparison with present norms and
expectations concerning bioprospecting. Two percent annual royalties would have been a reasonable claim
in this case, and in 1997 this amounted to US$ 24.3 million. Such benefits could, for instance, have been
targeted to conservation, scientific capacity building and health care. The study provides an indication of
possible gains for source countries countries with developed as well as developing economies in a case
of the finding of a blockbuster drug. Institutional prerequisites for benefit sharing are discussed, and the
emphasis, which often is placed on the role of patents as the cause of lack of source country benefits, is in
this case found to be misleading.

Key words: bioprospecting, Convention on Biological Diversity, cyclosporin, genetic resources, hypho-
mycetes, Novartis, Tolypocladium inflatum

Introduction

The Convention on Biological Diversity (CBD) has three objectives: the conserva-
tion of biodiversity, the sustainable use of its components, and the fair and equitable
sharing of the benefits from the use of genetic resources (UNEP 1992, Article 1). The
CBD can, to a large extent, be seen as a result of a Coleman exchange (Coleman
1990) between countries of the North and the South as two actors controlling and
having interests in opposite items (Svarstad 1994, 1998).
Bioprospecting has been defined as the exploration of biodiversity for com-
mercially valuable genetic and biochemical resources (Reid et al. 1993). The idea
of bioprospecting was first presented by Thomas Eisner (1989 and 1991) and then
entitled chemical prospecting. Bioprospecting is abbreviated from biodiversity
1522

prospecting a term widely dispersed by Reid et al. 1993. Pharmaceutical pros-


pecting (Aylward 1993) and genetic prospecting (Krattiger and Lesser 1995) are
related terms. Baker et al. (1995) excludes the term bioprospecting for the search
for bioactive substances when the selection is based on indigenous knowledge. This
article, however, focuses on a case of bioprospecting by random sampling which
otherwise in the literature is generally considered as bioprospecting.
On the one hand, many see bioprospecting as an activity which may contribute
to all three objectives of the CBD at the same time and with particular reference to
poor but biodiversity rich countries in the South (Reid et al. 1993; ten Kate 1995;
Baker et al. 1995; Mugabe et al. 1997; Svarstad 2000). These authors moderate their
optimism by prescribing a number of preconditions and limitations for bioprospecting
if it is to contribute to the CBD goals. On the other hand, some see bioprospecting
as plundering of poor people and countries and prefer to label it biopiracy (Shand
1993; RAFI 1994, 1995; Shiva 1995, 1997; Bell 1997; Svarstad 2000).
The literature on bioprospecting points to the pharmaceutical industrys resur-
gence of interest in the use of biodiversity as a source of novel chemical compounds
(Aylward 1993; Cunningham 1993; Reid 19931994; Ten Kate 1995; McChesney
1996). Technological development, particularly the development of automated screen-
ing techniques, is highlighted as a core explanatory factor (Reid 1997). Like most
economic activities, the future of bioprospecting is unpredictable. It depends on fac-
tors such as further technological developments and political decisions surrounding
access to genetic resources (Ten Kate 1995; Reid 1997).
The threat of deforestation is sometimes put forward as an explanatory factor
behind bioprospecting: The commercial potential of biodiversity has driven phar-
maceutical and biotechnology companies to seek out and extract useful biological
resources before it is too late (Fenwick 1998). However, this explanation is unlikely,
as the actions of companies cannot be understood as long term rational, and their
primary concern is own performance rather than maximization of general welfare.
Until recently, biodiversity and its components have more or less been handled
as open access resources. Open access to biodiversity can be defined as a situation
where nobody has the right to decide over other actors access to and utilization of
biodiversity. Attempts have seldom been made to exclude the access of others or to
demand payment for other actors collection and use of genetic resources. Neverthe-
less, there are profound historical examples, particularly from the colonial period,
in which countries without success have attempted to restrict access to their genetic
resources, such as Bolivia and Ecuador with cinchona (Juma 1989).
Two changes have altered this situation. Firstly, patents related to biotechnology
inventions and strengthened plant breeders rights provide for private ownership and
commodification of genetic resources which have been subject to scientific alteration
(Kloppenburg 1988; Fowler 1994).
Secondly, and to a large extent as a reaction from developing countries to the first
change, the CBD makes it clear that the general principle of national sovereignty over
1523

natural resources also applies to genetic resources that have not been subject to al-
teration by conventional science. The CBD Article 15 establishes a new regime in
international law to ensure access to genetic resources by other Parties to the Conven-
tion, subject to certain principles and conditions. One important principle is the fair
and equitable sharing of benefit from the utilisation of genetic resources. Furthermore,
access should be subject to mutual agreed terms and prior informed consent of the
providing country (UNEP 1992). A number of observers see this change as an encour-
agement for countries in the South to view biodiversity as a valuable possession for
which conservation and income through bioprospecting could be combined (Reid et al.
1993; Juma and Snchez 1994; Mugabe et al. 1997). Many countries today face deci-
sions concerning the establishment of institutional frameworks around bioprospecting.
Glowka (1998) lists 33 countries with planning and legislative activity in this field.
What may the difference imply for a source country between open and regulated
access in case of a blockbuster drug? It is far too early to analyse the full effects
of medicines and other products developed within the new regime, as such activities
usually take many years. However, studies can be made of cases of products devel-
oped within the open access regime and effects for source countries can be compared
to present proposals and practises within the new regime. In this article, we show
how bioprospecting was conducted within the context of open access in a case where
a current blockbuster drug was developed by a pharmaceutical company in Swit-
zerland based on bioprospecting conducted in Norway 30 years ago. There is no
benefit sharing with the source country in this case. The article discusses the benefits
which could have been obtainable to the source country if access had been regulated.
Finally, we discuss some main institutional prerequisites for a source country to ben-
efit from pharmaceutical companies production based on its biodiversity as in the
NorwayNovartis case.

The open access collection

The Swiss pharmaceutical company Sandoz began its screening programme for anti-
fungal antibiotics in 1958. Since then, employees on business trips and on vacation
have routinely carried plastic bags for collection of soil samples for the screening of
microorganisms (Tribe 1998).
Dr Hans Peter Frey worked as a biologist at Sandoz. In 1969, he spent a couple
of weeks of holiday in Norway with his wife. During this holiday, Dr Frey collected
more than 50 soil samples (Frey, pers. comm. 22 April 1998 and 25 April 1998). One
of these samples contained the hyphomycete fungus Tolypocladium inflatum Gams. In
the years to come, Sandoz developed a medicine based on a biochemical, cyclosporin
A, which is produced by the fungus.
The samples were studied by researchers at Sandoz Department of Microbiology.
Dr Frey worked in another field in the other research department (Department of
Mutterkornanbau) located in the same building. The collection of soil samples for
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Sandoz was conducted by employees of these two departments with 3040 employees
(Frey, ibid.). There were certain norms among the scientists that they, by collecting
samples while on trips, should help each other and contribute to the discovery of new
strains of useful microorganisms (Frey, ibid.).
When Dr Frey and his wife arrived in Oslo, they rented a car which they drove to
Bergen. On the way, they crossed through the mountain plateau of Hardangervidda
(Figure 1). Driving along, they occasionally stopped the car because they found the
scenery nice for taking pictures. On these stops, Dr Frey used the opportunity to col-
lect soil samples (Frey, ibid.). The collection sites were, in fact, selected on aesthetic
criteria.
Dr Frey writes: The soil sample containing Tolypocladium inflatum was collected
on September 3rd, 1969 at the border of the riksvei Nr.7 between Lake rteren and
Dyranut on an altitude of about 1200 m a.s.l. (Frey 1998).
Hardangervidda is the largest mountain plateau and the southernmost arctic
plateau in Europe, covering some 4000 km2 It is the habitat for a number of arctic

Figure 1. T. inflatum was isolated from soil collected at the edge of a road (Riksvei 7) crossing the
Hardangervidda plateau. The likely collection site, based on description and photos by the collector, is
marked on the map.
1525

animals, plants and fungi in Europe, and is known for being the grazing area for
Europes most important stock of wild reindeer. Hardangervidda is owned partly by
the state and partly by private landowners. The soil sample was most likely taken
from privately owned land. In 1981, Hardangervidda National Park was established
close to the road along which Dr Frey made his crucial collection; it constitutes the
largest national park in Norway.
Dr Frey did not request for any permits concerning the collecting of soil samples
in Norway. There was no prior informed consent by the Norwegian government,
and no papers were filled in at the customs when Mr and Mrs Frey went home by
aeroplane from Bergen (Frey, pers. comm. 22 and 25 April 1998). There was no
regulation of access to biodiversity aimed at securing benefit sharing at that time.
On the contrary, fungi (those producing fruiting bodies) as well as wild flowers and
berries are subject to open access in Norway. According to Norwegian customary
law, such resources are neither owned by the owner of the land on which they grow,
nor by the State. The right for everybody to remove wild products like flowers,
berries and fungi has long traditions, and this is confirmed in Norways Penal Act,
Article 400. It applies generally in outlying areas, such as forest and mountain ar-
eas (off-farm areas utmark), but not in cultivated fields, gardens etc. (in-farm
areas innmark); the collection of T. inflatum took place in utmark. However,
open access can be restricted for certain plants through formal protection of the
plant species or the plant habitat on the basis of Norways Nature Conservation
Act of 1970, but this did clearly not concern T. inflatum which was not previously
identified as a species. The rule of open access applies equally to Norwegians and
foreigners, and regardless of the purpose of the collection. One might argue that
it is meant to give people a right to pick berries and mushrooms for consumption
and sale, and that it does not necessarily apply to purposes such as the exploitation
of genetic and biochemical properties. However, there is no legal basis for such a
distinction.
Nevertheless, the right to pick plants and mushrooms does not imply that soil
also can be removed. Soil is the property of the landowner, and its removal is a theft
and subject to penalty according to Norways Penal Code. Penal Code articles 257
and 399, which explicitly make it an offense to take away stones, sand, earth etc.
from another persons land. The maximum penalty for theft in Norway is 3 years of
prison, but only 6 months if the value of what is stolen is insignificant (art. 391a).
Alternatively, fines may be used. In retrospect, it may of course be argued that the
soil that was taken away, turned out to have a very significant value for Sandoz and
Novartis, and that the landowner may have lost potential revenues. But this is hardly
relevant for the legal judgment of Dr Freys act in 1969. It is doubtful whether the
removal of a very small amount of soil in an outlying area as Hardangervidda at that
time would have been regarded as a violation of the law at all, and it is unlikely that
it would have been subject to prosecution. It should be added that no special nature
conservation regulations applied to the area where the fungus was taken.
1526

In 1968, Norway adopted a new regulation on control of export of plants and


parts of plants (Regulation of 26 July 1968). It was replaced by the present regulation
on export of plants and parts of plants dated 17 June 1988. All such export became
subject to a compulsory reporting system and a formal approval by Norwegian au-
thorities. Violations were subject to fines (Article 10 in the Plant Disease Act of 14
March 1964). The purpose of the regulation was to prevent the spreading of plant
diseases. There was no definition of plants in the regulation. Although, biologically,
fungi are not plants, it cannot be excluded that it applied legally to filamentous fungi.
However, its main field of application was commercial export of flowers and trees,
and there was no indication in the text that it would apply to fungi.
So, from a legal point of view, it is difficult to conclude that Dr Frey violated
Norwegian law when he removed the soil sample from Hardangervidda, and took it
out of Norway. It is true that the Penal Code formally applied to his act and it is
possible, although not probable, that the regulation of plant export applied. However,
it is quite unlikely that it would have been seen as an offence at all, and it would most
certainly not have been subject to any prosecution. At least for organisms such as
fungi, there was a situation of open access.

Fungal biodiversity

Biodiversity and Conservation 6(5), 1997, is devoted to fungal biodiversity. The issue
demonstrates the diversity of fungi, and fungal habitats and appeals for a better un-
derstanding of their relationships (Watling and Hawksworth 1997). Webster (1997)
points out that microbial diversity has been neglected in the present attention paid to
biodiversity among animals and plants, although there is an estimate of 1.5 million
species of fungi, most still undescribed, ranking fungi second only to insects in num-
ber of species. Fungal biodiversity has a key role in maintaining ecosystems, playing
a critical role in nutrient cycling, decomposition and various obligatory symbioses
(Ibid.; Hooper et al. 1995). In addition fungi provide various benefits to humans rang-
ing from fermentation (baking, brewing), controlling agricultural pathogens, and an-
tibacterial compounds to novel biochemical products. The medicinal product derived
from T. inflatum is a case that shows how immensely valuable fungal biodiversity
sometimes can be in medicinal and economic terms.
Tolypocladium inflatum (strain NRRL 8044) was isolated in 1970 from Dr Freys
soil sample from Hardangervidda, and first misidentified as Trichoderma polysporum,
Cylindrocarpum lucidium and Beauveria nivea but later proved to be Tolypocladi-
um niveum. It has since been recognised as quite a widespread fungus and isolated
from soil samples in USA, Sweden, widely in Canada and Norway, and also once
from Nepal (Baath and Sderstrm 1979; Bisset and Parkinson 1979; Bisset 1983),
thus having temperate and alpine, and, even, tropical distribution (Mikael Dreyfuss,
pers. comm. 22 April 1998). It was first, however, described from Denmark in 1916
1527

(Dreyfuss and Gams 1994) as Pachybasidium niveum, and renamed as T. inflatum.


Cyclosporin A is also produced by other organisms (e.g., Fusarium spp., Neocosmos-
pora spp.) as a secondary metabolite where some forms are considered as Cyclosporin
A ancestors or precursors (Rehcek 1995).
Researchers at Sandoz first found cyclosporin A as a product of a fungus (as
C. lucidum) collected in Wisconsin in the US. Nevertheless, the discovery of the
medicinal properties, and further development and production of cyclosporin A was
conducted from the use of the Hardangervidda fungus. The reason was that the Nor-
wegian fungus was capable of growth in submerged culture (Tribe 1998), easing the
culturing and extraction process.

Medicinal effects

Cyclosporin A is considered the prototype of a new generation of immunosuppres-


sants with the striking capability of selectively influencing defined subpopulations of
cells (Borel et al. 1976, 1977; Balakrishnan and Pandey 1996). Its unique property
of being one of the first to demonstrate that an immunopharmacological approach
to the modulation of the immune response is feasible, led to significant advance for
transplant surgery (Borel and Kis 1991). Earlier immunosuppressive agents lacked
pharmocological specificity, blocking cellular division non-specifically and inhibiting
growth of essentially needed cells (immunocompetent).
Cyclosporin A medicine is today generally preferred as an immunosuppressant
to prevent allograft rejection. Allograft is a tissue graft derived from a genetically
different individual of the same species. The first applications of it were made in
relation to heart and kidney transplantations. The organs successfully grafted include
nerve, pancreas, muscle cells, lung, small bowel, islet cells, cornea, skin, and liver
(Balakrisnan and Panday 1996). Cyclosporin A has relatively low toxicity effects.
Patients who have had organ implantations need to use immunosuppressive medica-
tion the rest of their lives. The potency and novelty of cyclosporin A is not limited
to transplant surgery; it also exerts antifungal, antiparasitic (murine schistosomiasis,
malaria, toxoplamosis and filariasis), antiinflammatory activities, and is useful with
autoimmune disorders (Balakrishnan and Pandey 1996). Of immense significance is
also its potential in inhibiting HIV-1 replication. This makes it directly relevant to
combating AIDS (Thali 1995). Many potential functions of cyclosporin A (including
those mentioned above) are in the process of investigation.
A laboratory manager at Sandoz in 1972, Jean F. Borel, claims to be the inventor
of cyclosporin, and the literature usually refers to him as that. However, the discovery
must instead be seen as a result of Sandoz large screening program and the com-
panys decision in 1965 of incorporating immune reaction tests. The test procedure
and its institutional structure was developed by Hartmann Sthelin. The imuno-sup-
pressive properties of cyclosporin were first registered by the laboratory assistant
1528

Sibylle Stutz who brought them to the section head Sthelin. Borel was then ordered
to conduct more detailed examinations. At a point, Borel wanted to stop further tri-
als because of negative findings, but Sthelin found mistakes in Borels testing and
ordered a continuation of the trials (Haller 1992; Sthelin 1996; pers. comm. with
Sthelin AprilMay 1998). Despite knowing better, Sandoz has always presented Bo-
rels claims. Haller (1992) believes this is because Borel proved to be an excellent
marketer for the companys cyclosporin products. This is a case where a companys
image building and sales have been more highly valued than fairness.

Producer, sales and production

Sandoz and Ciba Geigy, both with headquarters in Basle, Switzerland, merged in
1996 to form Novartis. This was the largest corporate merger in history at the time.
The new company presents itself as the worlds leading life science company (Nov-
artis homepage on the Internet). It produces commodities for human health care,
agribusiness and nutrition. At the end of 1997, Novartis employed 87,239 people,
a decline from 116,178 the year before (Novartis 1998).
Novartis total sales in 1997 were US$ 21.5 billion (CHF 31.2 bn) (Anon. 1998a).
Based on sales, the company is ranked as the worlds second-largest pharmaceutical
company (Anon. 1997).
In 1983, Sandoz first introduced Sandimmun, its medicine based on cyclosporin
A. An improved formulation called Sandimmun Neoral became available on the mar-
ket in 1994 (Novartis Pharma AG 1998). Sandimmun and Sandimmun Neoral are
Novartis leading pharmaceutical products today, and these drugs generated revenues
of US$ 1.216 billion (CHF 1.8 billion) in 1997 (Gjersvik, Novartis Norge AS, letter,
17 March 1998).
After the collection of the original sample from Hardangervidda, it was not nec-
essary to go back to recollect samples for either research or production. The original
culture has been easy to perpetuate. Novartis produces cyclosporin A by isolation
from large scale fermentation broth cultures of T. inflatum. As the fungus grows, it
produces cyclosporin A and at saturation the biochemical is extracted. Novartis pro-
duction of cyclosporin A has always been based on the strain from Hardangervidda
(Dr Mikael Dreyfuss, pers. comm. 22 April 1998; Ms sta Gjersvik, pers. comm.
29 April 1998). According to Frey, it has not been necessary to make recollections,
because all that was needed for starting large-scale production was less than a handful
of soil (Frey, pers. comm. 25 April 1998).

Estimation of source countrys loss of benefits

The collection of the soil sample with the Hardangervidda fungus was not con-
ducted according to prior informed concent or mutually agreed terms. Thus, there is
1529

no direct sharing of the current benefits. We discuss here some of the lost opportu-
nities in comparison with present norms and expectations concerning bioprospect-
ing.
There is a lack of data concerning actual and potential earnings from biopro-
specting. Several authors, who are generally positive to bioprospecting, warn against
unrealistic expectations from source countries (Reid et al. 1993; Iwu 1995; Ten Kate
1995; Krattinger and Lesser 1995). In the present situation, it is useful for decision-
makers to have some indications of a source countrys possible earnings in a case
of a major finding. The chances for a hit from any collection are small. Besides,
development of a new drug takes about 12 years and necessitates investments on
average of $ 231 million (DiMasi et al. 1991). Providers of regulated access to genetic
resources may choose to demand benefits primarily in terms of royalties from sales of
eventual products or, more safely, they can emphasize the demand of more immediate
benefits for purposes such as conservation or capacity building.
In the following, we will first give an idea of the total economic benefits that would
be reasonable for Norway to demand if the context were one of regulated access,
with benefit sharing based on mutually agreed terms, instead of open access. Here
we assume a situation in which Norway chooses the alternative of selecting benefits
entirely in terms of royalties without any immediate benefits. Thereafter, we will look
at some options for negotiating specific types of benefits. Environmental economists
and others have used a range of different strategies to calculate the economic value
of biodiversity and bioprospecting for medicines (Aylward 1993; Brown and Moran
1994; Ten Kate 1995; Principe 1996). This article is delimited in scope to only discuss
the open access related loss of benefits in the NorwayNovartis case.
Thus we ask; What royalty rate would have been realistic and reasonable to de-
mand in the NorwayNovartis case? Data on royalty rates are scarce as this is usually
considered as information confidential to the parties. Therefore, expectations can vary
considerably. In the 1991 agreement between the CostaRican institute INBio and
the US-based pharmaceutical corporation Merck & Co, the size of the royalty has
never been publicly confirmed. Nevertheless, Laird (1993) observes that while some
sources state that this particular royalty ranges from 13%, others report on rates of
up to almost 40%.
From interviews with pharmaceutical companies, Laird and Ten Kate report
royalty ranges of 0.52% for raw materials (including soil samples); 14% with
value-added data (including ethnobotanical or some screening results); and 215%
when there is clinical data (Laird and Ten Kate 1999).
Royalty rates depend on a number of factors. First, they reflect the norms and
negotiation capacities of the parties. The source country may succeed in improving
terms by referring to contributions such as taxonomic and ethnobotanic information,
and any further value added as well as efforts to conserve biodiversity thereby secur-
ing the natural sources for bioprospecting. In cases of synthesized natural products,
royalty rates tend to decrease substantially.
1530

When the Hardangervidda fungus was collected, Norwegian scientists were not
contacted, so clearly there were no scientific contributions from Norway. Further-
more, there was no traditional knowledge involved. The collection must therefore be
considered as one of a random and raw sample. On the other hand, the final medicine
production is not based on any synthetic derivative but relies directly on the fungus
isolated from the Hardangervidda sample. We made inquiries to various people in-
volved in bioprospecting about what a reasonable royalty rate to demand in this case
would be. We arrived at the conclusion that Norway, in a situation of regulated access,
could have had a reasonable claim of 2% annual royalties given the particularities of
the case. This is within the above referred range that Laird and Ten Kate report as
industrys praxis. In 1997, 2% of the sales of Novartis two medicines produced from
the Hardangervidda fungus amounted to US$ 24.3 million.
Providers of genetic resources with additional values of traditional and scientific
knowledge should be able to make realistic demands for considerably higher royal-
ties. On the other hand, it must be emphasised that hits from bioprospecting are
rare and this is an exceptional case of a major blockbuster drug. Furthermore, there
are clearly management costs involved with a system of regulated access to genetic
resources. In a total cost-benefit analysis concerning an implementation of regulated
access to genetic resources, costs could be included concerning the countrys own
access to genetic resources from other countries, as well as benefits from other cases.
This article, however, is delimited in scope to concentrate on the NorwayNovartis
case.
In the following subsections, we look at some specific areas which are highlighted
in the present debate as relevant targets for benefits from bioprospecting. A country
providing access to biodiversity will have to make decisions about the distribution of
any benefits between different targets, and this will reflect power structures and the
interests that manage to participate in decision making. Furthermore, when immediate
benefits are preferred instead of eventual later royalties, the total benefits are likely to
be less with a major hit.

Lost benefits for conservation

In the debate, bioprospecting is often connected to the conservation of biodiversity.


We can distinguish between two mechanisms in the literature linking bioprospect-
ing to conservation. Firstly, bioprospecting is seen as a way to increase incentives
for conservation because, in contrast to more degrading alternatives, it can provide
benefits from an economic activity, which may be conducted in otherwise restricted
areas. Secondly, benefits from bioprospecting may be used to finance conservation
efforts (Reid et al. 1993; Mugabe et al. 1997). On the other hand, investments in
bioprospecting as a biodiversity conservation policy have been criticised by econo-
mists (Simpson et al. 1996; Simpson 1997). Hits are rare and the estimated average
value of conserving a hectare of land even in biodiversity hotspots is low. Therefore,
1531

these economists argue that bioprospecting cannot provide significant incentives for
conservation.
An example often referred to in the debate is the 1991 contract between INBio and
Merck. INBio stated that 10% of the up-front benefits of US$ 1,135,000 and 50% of
any royalties would be given to environmental authorities (Reid et al. 1993). From a
country in the North an example is provided by the 1997 deal between Yellowstone
National Park in the USA and Diversa Corporation. Yellowstone received an up-front
payment in exchange for access to biodiversity, and it will also get royalties accord-
ing to specified rates in the case of any commercial product developed from this
bioprospecting. Collecting microorganisms is particularly attractive in Yellowstones
thermal features such as hot springs (WFED Internet; Ten Kate et al. 1998) due to
their unique biology (Hooper et al. 1995).
Neither Novartis nor its predecessor Sandoz have ever given money directly to
conservation efforts in Norway. Although Norway is a relatively wealthy country,
many conservation tasks are not conducted because of lack of funding. For instance,
the State budget for protected areas has been very limited over many years, and well
below the norms established by the IUCN (Deputy Director Harald Smith Ruberg,
Ministry of Environment, pers. comm. 3 September 1999). More funds would make
it possible to increase protection of important biotops. This is expensive since Nor-
wegian law generally requires compensation for landowners. Furthermore, many pro-
tection and restoration measures could be facilitated within established protection
areas, not least within the Hardangervidda National Park. Strengthened control and
supervision, marking of the parks borders, and restoration of traditional paths that
have been partly destroyed by motorised traffic, are some examples of needs.
Increased funding would also make it possible to improve research, education and
information activities about the rich, natural and cultural heritage of Hardangervidda.
Such activities are quite limited today. At Hardangervidda, an information centre,
Hardangervidda Hgfjellstun is planned as a co-operative venture between tourist
organisations and local municipalities around the national park. The information cen-
tre will focus on the use and conservation of natural resources at Hardangervidda.
The initiators asked Novartis in 1998 to sponsor the project with appr. US$ 250,000
(NOK 2 million). This request was made with reference to Novartis benefits from
the Hardangervidda fungus (Morten Jdal, pers. comm. 26 April 1998 and 11 Sep-
tember 1998). In 1999, Novartis decided to provide a more modest contribution of
US$ 31,250 (NOK 250,000) to the project (sta Gjersvik, Novartis Norway, e-mail
18 May 1999).
The medicinal application of the Hardangervidda fungus is often used as an ar-
gument for conservation of biodiversity in Norway (e.g., Hyland & Ryvarden 1990;
WWF Norway 1998). This implies that bioprospecting provides incentives for con-
servation in the source country although there is hardly any economic benefits linking
bioprospecting and conservation. In this case, the assumptions of the proportionality
of benefits and conservation incentives of both the pros and the cons in the debate
1532

on bioprospecting are invalid. Public opinion on conservation cannot be reduced to a


question on rational interests concerning amounts of economic benefits.
Furthermore, this is a case where we can see that the second mechanism that
could link bioprospecting to conservation is not put in force; Economic benefits for
conservation is lacking due to lack of regulation of access.

Lost benefits for scientific capacity building

Scientific capacity building is often considered as an important target for benefit shar-
ing in bioprospecting (Reid 1993; Ten Kate 1995). At INBio, benefits from biopro-
specting contribute gradually to increasing the capability to conduct more and more
advanced drug research and development. This increases the institutes value-adding
from bioprospecting (Mateo 2000).
In the NorwayNovartis case, Norwegian scientists and institutions were not in-
vited to participate in collection, research or development. Even though some agree-
ments have been made between university institutions and private industry today,
the universities in Norway are still not deriving many benefits from the corporate
application of biodiversity for medicinal development.

Lost benefits for health care

When biodiversity is screened for the purpose of developing medicines, improve-


ments in health care may be defined as a target for benefit sharing. Moreover, it may
sometimes be a good idea to connect benefit sharing directly to the new medicines.
Although the Swiss bioprospecting in Hardangervidda did not yield any economic
benefits to Norway, the medicine is life-giving and valuable for many patients in Nor-
way and throughout the world. In Norway, 27 patients went through a stem cell (bone
marrow) transplantation in 1997 and 291 patients had an organ transplantation (Anne-
Brit Be, National Hospital University of Oslo, pers. comm. 27 April 1998). Stem
cell transplanted patients need Sandimmun Neoral for prescribed periods, whereas
organ transplanted patients will depend on the medicine for the rest of their lives.
Norwegian patients with auto-immune diseases also use Sandimmun Neoral today
(sta Gjersvik, Novartis Norway, e-mail 24 April 1998). In total, there are more
than 1800 patients in Norway today who use Sandimmun Neoral or Sandimmun.
World-wide, some 200,000 transplant patients relied on Sandimmun in 1996 (Tribe
1998).
Cyclosporin medicine is of immense benefit to the patients, and it is needless to
make any economic calculation of this value. Norway is one of the richest countries in
the world, and cyclosporin medicine is accessible to all patients in need of it. Never-
theless, this is a very expensive medicine for society. The cost for treating one patient
with Sandimmun Neoral for one year is about US$ 2600 4600 (NOK 2035,000)
(Frode Haugen, Novartis Norway, pers. comm. 15 April 1998). In Norway, the sale of
1533

Sandimmun and Sandimmun Neoral was US$ 9 million (NOK 68,657,500) in 1997
(sta Gjersvik, Novartis Norway, e-mail 29 April 1998).
If the NorwayNovartis fungus had been acquired on terms providing Norwegian
patients with any resulting medicines gratis or at cost, the Norwegian health system
would have saved these expenses. This would resemble an element of the 5-year
agreement that was made in February 1998 between another large pharmaceutical
company from Switzerland, Hoffmann-La Roche, and deCODE Genetics of Iceland.
In this contract, Hoffmann-La Roche is given access to human genetic information on
the population of Iceland and genes involved in 12 specified diseases. According to
deCODEs director, Dr Kari Stefansson, the blood samples of patients will be taken
with prior informed consent of the patients (Dr Kari Stefansson, pers. comm. 28 April
1998). In exchange, deCODE will receive benefits including an equity investment of
$ 200 million and royalties on drugs that Hoffmann-La Roche develops. In addition,
Hoffmann-La Roche will provide any medicines from resulting discoveries to the
Icelandic people free of charge (Dorey 1998). Iceland and Norway are countries with
small populations (240,000 and 4.3 million people), and free access to medicines for
relatively limited groups of patients can only constitute a part of any benefit sharing.
With larger countries (or several in co-operation) access to cheap medicines for more
widespread diseases may constitute more important parts of benefit sharing frames.

Institutional prerequisites for benefit sharing

What specific characteristics by the institutional setting prevented Norwegian gains


in this case? More generally, we can ask what the prerequisites would be for a source
country to benefit from pharmaceutical companies production based on their bio-
diversity as in the NorwayNovartis case.

Institutional changes in the source country

Central publications on bioprospecting point to the importance of establishing


policies, strategies, legislation and procedures for the implementation of countries
national sovereignty over their genetic resources (Reid et al. 1993; Ten Kate 1995;
Mugabe et al. 1997). Our study of the NorwayNovartis case supports these claims.
Although Norway is a rich country, an annual income of more than US$ 20 million
would indeed be appreciated, and for developing countries such extra incomes could
make very useful additions to conservation, scientific capacity building and/or health
care. In Norway, there have been no significant changes in law governing access to
biodiversity since 1969. Since the Hardangervidda National Park was established in
1981, general regulations have been established to prevent disturbance of biodiversity
in the Park (Regulation for Hardangervidda National Park of 10 April 1981, based on
the Nature Protection Act of 19 June 1970). Any removal of plants, including their
1534

roots, is therefore prohibited, but can be subject to exemption for research purposes.
This regulation does not serve the purpose of benefit sharing, micro-organisms and
soil samples are not addressed, and, moreover, collections can still be freely made
outside the borders of the national park, for instance along the road where Dr Frey
collected samples in 1969 (Figure 1).
Why has a country like Norway not paid any attention to secure benefit sharing
from access to its own biodiversity in the follow-up of the CBD? Among civil servants
in relevant positions in the Norwegian government, access to bioprospecting has been
seen solely as an issue for tropical countries. However, with reference to bioprospect-
ing in the USA, Cornell University professor Jerry Meinwald says: Our own flora
and fauna is as unexplored as those in any tropical rainforest (Anon. 1998b). Cor-
nell University recently became involved in the first bioprospecting deal concerning
fungi in a temperate climate. The collection and cataloguing of fungi is conducted by
Cornell scientists for the US drug producer Schering-Plough at a small nature reserve
that will receive royalties on any drugs that result.
Hawksworth (1997) expresses a concern that implementation of the CBD may
cause limitations of access to a nations genetic resources for research and with par-
ticular reference to fungi. In order to avoid obvious loopholes in securing of benefit
sharing, it is necessary that all collections, including those for basic research, are sub-
ject to regulations. Charges, however, should, in those instances be kept at a minimum
except for the signing of an agreement concerning royalty rates in case of any de-
rived commercial developments. On the other hand, it is important that governments
avoid establishing legislation and procedures that turn the process of applications
into complicated and time-consuming gambling. In such cases, not only will basic
research be hampered, but also important medical (and other) developments. By
scaring away potential bioprospectors, these countries would strangle their own op-
portunities to obtain benefits. Furthermore, without effective procedures, transaction
costs will easily outdo income from the implementation of national sovereignty in
this sector.
In this article, we have shown that there may be different but well deserving
targets for the internal distribution of benefits from bioprospecting. Sharing of na-
tional benefits will rely upon each countrys policy-making about bioprospecting,
and the results will to a large extent depend upon what groups are capable of defining
themselves as stakeholders in the process.

Patents

In discussions, concerning institutional factors relevant for bioprospecting, patents


are central. Novartis holds several patents in many countries related to cyclosporin
A, Sandimmun, and Sandimmun Neoral. Table 1 lists the relevant US patents filed
19771995. Through patents, the company is provided with a temporal monopoly
for the production and sale of the medicine. Patents are considered as a way society
Table 1. Novartis US patents concerning cyclosporin A, Sandimmun and Sandimmun Neoral.

Patent no. Year filed Year issued Expires Title Inventors

4,117,118 1977 1978 1998 Organic compounds Hrri et al.


4,215,199 1978 1980 2000 Antibiotic production Hrri et al.
4,288,431 1979 1981 2110 Cyclosporin derivatives, their production and Traber et al.
pharmaceutical compositions containing them
4,289,851 1980 1981 2001 Process for producing cyclosporin derivatives Traber et al.
4,396,542 1981 1983 2003 Method for the total synthesis of cyclosporins, Wenger
novel cyclosporins and novel intermediates
and methods for their production
4,388,307 1982 1983 2003 Galenical compositions Cavanrak
4,554,351 1983 1985 2005 Method for the total synthesis of cyclosporins, Wenger
novel cyclosporins and novel intermediates
and methods for their production
4,703,033 1986 1987 2007 Novel cyclosporins Seebach
4,764,503 1987 1988 2008 Novel cyclosporins Wenger
5,169,773 1988 1992 2012 Monoclonal antibodies to cyclosporins Rosenthaler et al.
5,389,382 1991 1995 2015 Hydrosols of pharmacologically active agents and their List et al.
pharmaceutical compositions comprising them
5,342,625 1992 1994 2014 Pharmaceutical composition comprising cyclosporins Hauer et al.
5,639,724 1993 1997 2017 Cyclosporin Galenic Forms Cavarak
5,719,123 1994 1998 2018 Ciclosporin form for pulmonary administration Morley et al.
5,652,212 1995 1997 2017 Cyclosporin Galenic Forms Cavarak et al.
US patents are valid for 20 years from date of issue conditioned upon payment of annual fees.
1535
1536

remunerates a company for its expenses in research and development. The first US
patent was filed in 1977 and issued in 1978, and it would, if maintained, last until
expiration on 26 September 1998 (Hrri and Ruegger 1977). A recent patent in the
US was issued in February 1998, and is valid for 20 years (Morley et al. 1994). In
Europe, expiration dates of patents are related to the date of application, so the patents
expire earlier than in the US.
In the discussion of bioprospecting, patents are often singled out as a major factor
explaining unfairness in the exchange relation between providers of biodiversity and
bioprospectors (e.g., Shiva 1997). The property rights context of the NorwayNov-
artis case is seen in Table 2, alternative II. The combination of patent rights for the
company and lack of implementation of access regulation for source country provides
the worst alternative for Norway. There is no benefit sharing connected to accessing
biodiversity, and, due to the patents, Novartis can charge monopoly prices on the
medicines, including those sold to Norway. Norways annual cost of US$ 9 mill. for
buying the medicine is therefore larger than otherwise expected.
If regulation of access were implemented (alternative III and IV), Norway could
have demanded a share of benefits. In comparison of alternatives III and IV, III imme-
diately appears as the most favourable for source country with benefits from provision
of access and lower prices to pay for medicines. However, in alternative III, the med-
icine may be replicated by other pharmaceutical companies without a contract with
Norway. Therefore, the benefits to Norway for providing access in alternative IV
can be expected to be higher than in alternative III, because the patents would have
secured not only Novartis benefits but also the benefits going to source country. It
is not clear whether Norway in this case would have benefited the most from alter-
native III or IV as there are economic factors going in opposite directions. In this
article, we have delimited the scope from making economic calculations about which
of these two alternatives would be most favorable to Norway. However, we can see
that what clearly makes a difference in this case is that a national regulation of ac-
cess to biodiversity has not been implemented. This finding is contrary to viewpoints
often held in cases concerning bioprospecting and in this case in particular. Based
exclusively on our research, the Norwegian NGO magazine Folkevett (Common
sense), wrote about the NorwayNovartis case under the headline EU patented
on the front page with a picture from Hardangervidda. According to the magazine,
Norway loses millions annually because a foreign company has patented a medicine
made of fungus from Norwegian nature (our trans.) (Munkejord 1998). The editor

Table 2. Alternative combinations of property rights concerning bio-


diversity.

Not patents Patents

Access regulation not implemented I II


Access regulation implemented III IV
1537

was made aware of the misconception of our research before printing, but did not
want to change it; with Folkevett as the source, the news on the major Norwegian
TV channel (Dagsrevyen, Norsk Rikskringkasting) repeated the mistake 27 February
1999. This example illustrates the common sense of some NGO circles having made
patents the symbol of exploitation and uncritically interpreting any example involving
germplasm exchange as such.

Information requirements concerning marketing

In the NorwayNovartis case, the collection was conducted within an open access
regime, and the company has been open about where it obtained the material. Imple-
mentation of the new regime of national sovereignty over genetic resources, however,
changes the situation. Although customs officials may attempt to prevent smuggling
of genetic resources, it will be impossible to control all export of samples. Koester
and Prip (1993) proposed that parties of the CBD should require that patent applicants
provide information about the germplasms origin and prove that it had been acquired
in accordance with the spirit of the CBD. In the debate concerning the establishment
of the EU Life Patents Directive, this element was taken out in the last round.
Such an information requirement could also be connected to all marketing of bi-
ologically-based products. Elaboration and discussion of alternatives for information
requirements in the receiving countries would be important for the follow-up of the
CBD by the parties to the Convention.

Novartis adjustment to the new regime

According to Dreyfuss of Novartis, soil samples are no longer collected abroad by the
companys employees without contracts (M. Dreyfuss, pers. comm. 22 April 1998).
This change of practice came about as a consequence of the CBD. In 1994, Sandoz
issued a policy statement with rules of good practice for bioprospecting (Sandoz
1994), and Novartis still adheres to these rules (Dreyfuss, ibid.). Soil samples are
aquired in co-operation with local researchers. Novartis has contracts concerning pro-
visions of isolated microorganisms from partners, for example, in Mexico, in co-
operation with UZACHI a coalition of communities of Zapotec and Chinantecas
ethnicity (Chapela 1997). There are no such arrangements at present in other Europe-
an countries, and Dreyfuss claims that collecting samples from Switzerland provides
Novartis with sufficient research material from the European fungi. Besides, Dreyfuss
holds that anyone can go to the US to collect samples, since the US has not ratified
the CBD (Dreyfuss, ibid.).
According to Chapela, Novartis adjustment to the new regime of restricted access
is not unusual, as (p)ractically every major discovery-based pharmaceutical industry
has by now one type or another of bioprospecting agreement in place with a partner
in a highly diverse, usually tropical, environment (Chapela 1997).
1538

Conclusions

The CBD introduces a new regime of source countries national sovereignty over
genetic resources, in which benefit sharing is a central factor. In the implementation
of the CBD, countries today face decision-making concerning the establishment of
framework around bioprospecting to secure benefit sharing e.g. from new medicines.
This situation is the same for both developing and developed countries. The focus
has so far mostly been on developing countries with much biodiversity; new sources
of income may be particularly important for these countries. Our study shows that it
may also be relevant for developed countries to re-examine their open access policies.
Development of medicines takes time; thus, source countries total benefits from
present bioprospecting will not be clear in many years. By focusing of earlier cases
of bioprospecting, the whole process can be examined, from the collection of a hit
and until the situation several years later with large-scale production and sale of the
medicine. Our case study shows how T. inflatum was collected in Norway in 1969
within an open access regime, and in comparison with present norms and expecta-
tions concerning bioprospecting we estimate source countrys loss of benefits from
sales of cyclosporin medicines. Two percent annual royalties US$ 24.3 million in
1997 would have been a reasonable claim in this case. Such benefits could, for
instance, have been targeted to conservation, scientific capacity building and health
care. This would, however, require effective regulations and procedures to handle
access provisions on national level. Despite a large attention on patenting as a cause
of unfairness for source countries, patents related to the medicinal development is in
this case not found to be an important reason for the lacking benefits.

Acknowledgements

We would like to thank the following people for contributing ideas and comments
on this paper: Nicolas Mateo, Steven King, Sarah Laird, Cary Fowler, Lars Mj-
set, Trond Schumacher, Leif Christoffersen, Ingeborg Bjorvandengh, Alida Jay Boye
and Tone Granerud. We are also grateful for the information given in interviews by
former and current employees of Sandoz and Novartis, scientists at the University of
Oslo, governmental officials in Norway, and others. Nevertheless, the authors of the
paper take the full responsibility concerning any mistakes and conclusions found in
the article.

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