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Lithuania: New Initiatives in IP Protection in the Pharma Sector

Lithuania: New Initiatives in IP Protection in the Pharma Sector

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The Lithuanian life sciences industry has skyrocketed over the last two decades – the average annual growth within the biotechnology and pharmaceutical research and production sector reached over 19%, with 90% of its output exported. in 2017 Lithuania reached 16th place in the Scientific American Worldview biotechnology rankings. Lithuania dominates many (much) larger Central and Eastern European countries and boasts the fastest growing life science industry in Europe.

Currently, there are around 300 life science private companies in Lithuania and the private sector grows more than 50% a year (the average growth of life science turnover is 58%, and of pharma products is 60%).

Lithuania can now boast of investment by such companies as Moog, Teva group, Hollister, Thermo Fisher Scientific, Intersurgical. Furthermore, most of the largest worldwide innovative pharmaceutical companies (such as Johnson & Johnson, Pfizer, Novartis, Astra Zeneca, AbbVie, Sanofi, Lilly, and many others) have subsidiaries in Lithuania.

Moreover, Lithuania, which hopes to become the most attractive country in Europe for the development of Life Sciences, aims to have the sector yield five percent of GDP by 2030. Currently, the sector contributes more than one percent to Lithuania’s GDP, which is already six times the EU average.

Today’s success is not novel – the roots of the Lithuanian Life Sciences sector date back to the Soviet Union, when the Lithuanian sector was among the strongest in all the Soviet Republics.

The recipe for a strong Lithuanian Life Sciences sector includes, first, a well-developed educational system and qualified labor. Thus: 11% of all students (around 10,000) study Life Sciences in eight universities and nine colleges; there is an expert pool of 18,000 active life science researchers; and there are 16 research & development centers and five science centers which receive over 400 million euros of investments into equipment and infrastructure. 

Second, the recipe requires low costs and financial incentives. Thus: the country receives an estimated 400 million euros in EU structural & national support towards five specialized science and tech centers; there is a triple deduction of R&D cost from income tax; taxable profits are reduced by 50% if companies invest into substantial tech improvements; there is funding or reimbursement of the patenting costs for both academic institutions and private companies; and there are microgrants (so-called “innovation cheques”).

Finally, the recipe calls for a global outlook. Thus: 90% of Lithuanian life-science production is exported, to more than 100 countries; Medical device exports (including re-exports) have doubled since 2008 (particularly to the UK, Spain, Russia, France, and the US); every 10th scientific laser in the world was produced in Lithuania – and Lithuanian femtosecond laser systems take up to ten percent of the global market; there is a wide network of bilateral treaties on the protection of foreign direct investment against adverse state action; and there is a bilateral agreement with the Russian Federation on the promotion and reciprocal protection of investments making it a favorable starting platform for investments in Russia.

Lithuania, however, still has a lot of challenges ahead, which need to be addressed by the new Government, which will take office in November 2020. The main issues to solve during the upcoming political season include: Finding ways to apply R&D incentives to statistical, analytical, or data collection activities, as today the incentives are only applied to novel R&D activities which can be proven to have been performed in search of a solution to a technical problem; relaxing the requirements for innovative medicine reimbursement, as the current requirements remain overly strict and prevent Lithuanian patients from getting quick access to the most modern treatment and it sometimes takes up to ten years for new medicines to be included on the reimbursed medicines list; ensuring maximum transparency in project management and fund allocation; and removing unnecessary paperwork and administrative burdens, as well as unjustified economic barriers to the reimbursement of medicines, especially for oncological and rare diseases.

In general, the direction in which Lithuanian decision-makers are going is the right one, especially in terms of facilitating dialogue and listening to the arguments of all involved stakeholders. Despite that, as well as strong roots in Life Sciences, Lithuania has to think about issues of the future, including emigration, demographic challenges, and regional competition. This will become even more apparent after the Lithuanian parliamentary elections in October 2020.

By Ruta Pumputiene, Partner, Ruta Pumputiene Law Firm

This Article was originally published in Issue 7.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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