Pharmaceutical Research and Manufacturers of America - Policy Views - Issues Around The World - Special 301 Report



Intellectual Property Protection

There are two separate threats to adequate and effective protection for intellectual property in Israel: the failure of the Government of Israel to adopt protection for confidential data as required by TRIPS, and the continuing threat to patent protection posed by potential implementation of parallel import regulations. Given the GOI's failure to meet explicit TRIPS obligations, particularly in the area of data protection (TRIPS Article 39(3)), PhRMA requests that Israel remain on the "Special 301" Priority Watch List for the year 2000. PhRMA further requests that the U.S. Government initiate formal consultations with the Government of Israel under the auspices of the WTO in Geneva to provide a forum for discussion of these and other related issues.

Data Exclusivity: The GOI's TRIPS Omnibus legislation passed by the Knesset lacks critical data protection provisions required by TRIPS Article 39.3. Israeli health authorities do not provide any period of exclusive use of confidential data generated by a pioneer pharmaceutical applicant to demonstrate that the product is safe, or otherwise prevent reliance on this test data by copy-cat manufacturers. Israel's failure to provide any period of non-reliance also known as "data exclusivity" violates its obligations under the TRIPS Agreement. (See Appendix A for discussion of TRIPS Article 39.)

The GOI's Health Ministry allows reliance by local pharmaceutical firms on the confidential data that it receives from pioneer pharmaceutical applicants, arguing that as long as it refrains from active dissemination of confidential data from pharmaceutical marketing applications it has met its TRIPS obligations. This violates Israel's obligation under TRIPS Article 39.3. The lack of such protection in Israel allows manufacturers other than the right-holder to rely on test data from drug marketing applications by innovator firms almost from the date that the innovators receive their marketing approval.

Article 39.3's requirement to protect proprietary data against "unfair commercial use" is also completely independent of and complementary to Israel's obligations to provide adequate and effective patent protection. The Government of Israel is required to protect the data provided by innovator firms to gain marketing approval of their products in Israel whether or not the pharmaceutical product has an Israeli patent. While an Israeli patent would bar the manufacture and sale of a generic copy of the product until the patent expires, this by no means permits third parties to rely on the originator's data during the period of data exclusivity either during the patent term or after the patent has expired. Data exclusivity provisions do not bar a generic manufacturer from producing its own data and providing it to the government in support of its own independent marketing approval application. The generic, however, could not reference the originator's data and the government could not rely on the originator's data until after the period of data exclusivity.

During the legislative process for the TRIPS Omnibus legislation, the Israeli Government was advised by a committee of experts appointed by the Ministry of Trade and Industry (MOIT) to include protection for confidential data, along with other recommendations of this committee formed the basis of the TRIPS Omnibus legislation. Unfortunately, the Ministry of Justice intentionally disregarded the committee's recommendation on data exclusivity, and did not include it in the TRIPS bill. The lack of data protection is especially troubling given Israel's 1998 amendment of its patent law to allow local companies which are not patent owners or licensees to manufacture patented material prior to patent expiration in order to submit registration data to health authorities in Israel and elsewhere. Because the law now allows for this "early working" of patented products, the effective period of protection for patented pharmaceutical products under patents is shorter in Israel than in other developed countries. The effective patent period in Israel is now approximately five years, the shortest patent term in any developed country except Canada. The expected outcome of the E.U./Canada case may have negative repercussions for Israeli practices in this area.

Parallel Import of Patented Pharmaceutical Products: The Government of Israel has passed into law amendments to the Pharmacists' Act in early 1999 that, if implemented, would make possible importation by non-right holders of patented pharmaceutical products registered in Israel. Prior to adoption of this amendment, U.S. government and PhRMA officials had been assured that the goal of the legislation was to permit parallel import of generic products that were not under patent in Israel. We now understand that there has been powerful domestic pressure from the Health Funds, the Ministry of Finance and the Knesset in Israel to use parallel import of pharmaceutical products for generic and patented products alike. Although the Minister of Justice and officials of the Ministry of Industry and Trade, are advising against implementation of the regulations on the basis that they may conflict with Israel's multilateral obligations, PhRMA member companies remain concerned by intense political pressure to implement the legislation. In fact, the GOI has an obligation to implement, in some fashion, the legislation that has been passed by the Israeli legislature. Accordingly, PhRMA believes that unless patented pharmaceutical products are explicitly eliminated from the jurisdiction of the law, the parallel import program will: (1) facilitate patent infringement by importation by non-right holders; and (2) violate Israel's WTO TRIPS obligations, particularly in the area of data exclusivity and effective enforcement measures.

Even if patented products are removed from the jurisdiction of the regulations, there is still a risk of damage to Israel as an investment market for innovative research-based pharmaceutical firms under a parallel import program because of the lack of data exclusivity. In the absence of protection for confidential data in the TRIPS Omnibus legislation, in some cases, the government could approve the marketing by generic firms of first in market products by relying on the originators' data during what should be a period of data exclusivity. PhRMA appreciates the strong USG support that has thus far prevented implementation of the law, and will continue to work closely with all parties to insure that the final result does not weaken patent protection in Israel.

PhRMA also remains concerned by the failure of the GOI to provide adequate provisional and border measures required by TRIPS Articles 50 - 60 in order to deter infringement and counterfeiting activities, and will provide additional information in the enforcement area at a later time.

Damage Estimate

Research on assessing damage to industry due to absence of data protection is currently underway, and will be provided as soon as practicable. Damage to the industry from lack of protection for confidential data, given that the threat of parallel importation on patented pharmaceutical products is not in place, is difficult to estimate. However, based on experiences in other markets, parallel importation would have a domino effect on the whole market and would not be limited to a specific product. Parallel importation could seriously damage the Israeli healthcare system, and the Israeli pharmaceutical and related sectors.

For illustration of possible harm to the Israel market, consider the following: The Israeli pharmaceutical market totals some $690M (1998). Sales of patented imported products were approximately $450 M (most sales are by the multinational pharmaceutical companies). Sick funds represent 90 percent of the market i.e. $400 M in patented imported products. International research based firms invest $80M per annum in clinical trials conducted by Israeli medical institutions and physicians. If parallel importation of patented pharmaceutical products were to be implemented, many of these research initiatives could be moved out of Israel.