Excerpt from 2001 PhRMA Special 301 Submission


Despite its adoption of a new industrial property law designed to come into compliance with TRIPS, PhRMA members remain concerned that Morocco fails to live up to the minimum international standards embodied in the WTO Uruguay Round Agreements for intellectual property protection and fair market access. Accordingly, PhRMA requests that Morocco be included on the “Special 301” Watch List for 2001.

Intellectual Property Protection

In March 16, 2000, Morocco published Law No.17-97 relating to protection of industrial property. This law contains new patent and trademark legislation, which is intended to bring Morocco in compliance with its TRIPS obligations. It should be noted that this legislation has not been made available to industry in English, and that we are not assured that it is fully compliant with the WTO TRIPS Agreement. In particular, we understand that this law has been based on the French patent legislation, which is known not to be fully TRIPS compliant. Additionally, this law does not address the question of data exclusivity protection and does not create any system allowing for the protection of data exclusivity rights. PhRMA would appreciate any information available concerning the new law.

Market Access Barriers

Local Ownership Requirement

Under Law 1-59-367 of February 19, 1960 (the "Law"), only companies that are controlled by individual pharmacists can be regarded as "pharmaceutical companies" and be allowed to manufacture, stock, and market pharmaceutical products. The Law specifically requires for that purpose that 51% of the share capital of a pharmaceutical company be held by individual pharmacists and that 26% of the share capital be held by pharmacists licensed in Morocco (i.e. Moroccans).

As a result of this local ownership requirement, foreign companies creating a local subsidiary are compelled to make a choice between two evils: either (a) allow a pharmacist licensed in Morocco to own 26% of their local subsidiary in order that their local subsidiary be a "pharmaceutical company" (and may benefit from the rights granted to a pharmaceutical company), or (b) register all their products through a local licensee (or distributor for imports), and allow the local licensee (or distributor) to enjoy quasi-ownership rights over their products in Morocco. Indeed, in the latter case, the local licensee is treated by the Ministry of Health as the sole and true owner of the products registered by this licensee in Morocco. Throughout the life of the product in Morocco, and regardless of what the License Agreement provides, the local licensee is fully empowered to act as if it was the owner of the licensed products. As a result, the foreign investor cannot:

Actual ownership of the marketing licenses puts the licensee in a position of extreme strength vis-ŕ-vis the foreign licensor. For example, in case of termination, regardless of the provisions of the License Agreement, the Ministry of Health will refuse to transfer the marketing license of the products without the licensee's prior written approval. The licensee can take unfair advantage of this extremely strong position and is thus able to impose an onerous indemnification payment on the licensor, regardless of the original terms and conditions of the License Agreement.

The health authorities also require that, to become a "pharmaceutical company," a company must own a manufacturing presence. The Law is unclear as to the extent and form of such a presence, but the health authorities generally take the view that only full ownership of a manufacturing facility will meet this requirement. As a result, import licenses are in practice only given to companies who have their own local factory. Those who do not cannot own the registrations for their products and cannot be seen as true pharmaceutical companies. These companies can only be seen as a promotional agency acting for its local pharmaceutical partner. The Law is truly antiquated (1960); in particular as it assumes that the pharmaceutical industry only comprises pharmacists working out of their own shop. It was originally intended to protect pharmacists as a guild. The Law should be amended in order to allow foreign companies to retain full ownership of their local investment and be entitled to register their products under their name in Morocco. The conditions required for pharmaceutical companies to manufacture and market their products should be modernized. Other countries have shown that there are other and better ways to ensure that pharmaceutical products are safely manufactured and marketed in the best interests of the public.

High Customs Tariffs

There are high customs barriers on drugs: approximately 17% on imported raw materials and imported finished products that cannot be manufactured locally; approximately 40% on imported finished products which are deemed to be "locally manufacturable." This type of use of custom tariffs is solely protectionist and intended to safeguard local manufacturing. This also creates over-capacity at the local level. WTO membership should normally lead to a reduction in these tariffs, which adversely impact the competitiveness of foreign products.

Damage Estimate

PhRMA cannot provide a reasonable estimate at this time of lost sales or potential exports and growth in the market in Morocco, but would be interested in investigating new commercial opportunities in Morocco should the intellectual property and market access conditions improve materially.

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