February 16, 1999

Ms. Sybia Harrison
Special Assistant to the Section 301 Committee
United States Trade Representative
Room 100A
600 17th Street, N.W.
Washington, DC 20508

Dear Ms. Harrison:

On behalf of the Pharmaceutical Research and Manufacturers of America (PhRMA) and its member companies, I am pleased to submit our enclosed comments in response to the request of the United States Trade Representative (USTR) to identify countries that deny adequate and effective protection of intellectual property rights or deny fair and equitable market access to U.S. persons who rely on intellectual property protection.

Thanks to the continued efforts of USTR and other agencies such as the Departments of State and Commerce, we are pleased that there are fewer countries in the world today that truly deny adequate and effective patent protection for pharmaceutical products. Nonetheless, real problems and challenges continue to face our industry.

Priority Foreign Countries

The first challenge is that four countries - Argentina, India, Korea and South Africa - continue to resist adopting adequate and effective patent protection for pharmaceutical products or deny equitable market access to U.S. firms. Argentina and India continue to serve as regional and global centers of unauthorized copying of patented products on a broad commercial scale. They negatively affect our industry's ability to market our products, and weaken efforts to carry out research and development (R&D) into vital new therapies, thereby adversely impacting patients worldwide. PhRMA member companies lose over US $1 billion a year through such unauthorized practices in these two countries alone.

This year we have added Korea as a priority for our industry, due to the lack of progress in deregulation and trade liberalization on four key issues: provision of equal and fair treatment for imported drugs, restoration of data protection for innovative products, harmonization of registration requirements, and liberalization of toll manufacturing. Korea has ignored TRIPs obligations to provide an adequate period of exclusivity for data generated in the development of innovative medicines. Despite continued efforts by the American Chamber of Commerce and the U.S. Embassy to assist the Korean Government in eliminating trade barriers, our industry now believes that significant progress cannot be achieved in Korea without a bilateral challenge including WTO level trade action.

South Africa is highlighted because it has reneged on its commitment to implement TRIPs and has actually weakened the terms of intellectual property protection for pharmaceuticals. South Africa provides no protection for proprietary registration data. It is one of the first "test cases" for interpreting the scope of protection offered by TRIPs to all fields of technology, and thus has importance far beyond its own borders. Our difficulties with the South African Government go well beyond issues of mere semantics. At the January 1999 meeting of the WHO Executive Board, the South African Government made clear its intentions regarding pharmaceutical patents by stating: ". . . we have passed legislation to enable South Africa to parallel import pharmaceuticals and to allow for the issuing of non-exclusive compulsory licenses."

Based on the above discussions, PhRMA recommends that Argentina, India, Korea and South Africa be designated "Priority Foreign Country" under "Special 301" for 1999.

Priority Watch Countries

PhRMA believes that 16 countries should be identified as "Priority Watch" countries in 1999. These are divided into three categories: the first includes countries with violations currently actionable under TRIPs; the second comprises countries with violations which will be actionable in 2000 if not remedied during the coming year; lastly, the third category includes two countries which are not WTO-signatories but that have significant violations of the intellectual property rights of our industry. We believe that this approach will be most helpful to USTR as its shapes its own strategy to address the challenge of widespread noncompliance with the TRIPs obligations secured by the U.S. in 1995.

The first "Priority Watch" category with currently actionable TRIPs violations includes Canada. Canada has failed to meet its basic TRIPs obligation to provide 20-year protection, from the time of application, to all patents that were in force on January 1, 1996. Our companies will suffer hundreds of millions of dollars in damage when important products are forced off patent prematurely due to Canada's failure to comply with its international obligations. Canada simply cannot be permitted to pick and choose which TRIPs obligations it will honor. PhRMA urges USTR to consult with Canada expeditiously and to pursue appropriate WTO action against Canada if this clear violation of TRIPs is not rectified immediately.

The second "Priority Watch" category, with violations that will become actionable at the start of next year, include: five countries in the Andean Community (Bolivia, Colombia, Ecuador, Peru, Venezuela), Egypt, Indonesia, Israel, New Zealand, Pakistan, Taiwan, Thailand and Turkey.

The third "Priority Watch" category includes China and Jordan, neither of which are WTO members, but both of which have significant violations of the intellectual property rights of our industry.

Watch List Countries

Furthermore, PhRMA and its member companies have identified 29 countries and regions which we believe should be placed on the Watch List under Special 301 in 1999.

While the countries identified as "priority watch" and "watch" present less egregious examples of violations of intellectual property rights than the four "priority foreign countries," they nonetheless involve issues of substantial concern to the pharmaceutical industry. Many of the countries which have adopted legal codes to protect pharmaceutical product patents still do not adequately enforce those codes, or have not implemented agreed-upon provisions, such as "pipeline" protection. Other countries have limited or devalued the patent protection offered for pharmaceutical products, or have denied fair market access to our companies, through the use of import barriers, high tariff rates, and delays in drug registration. Lastly, a number of developed countries are in violation of TRIPs Article 39(3) in failing to provide data exclusivity, or having limitations or conditions that are below TRIPs standards. Resolution of these Article 39(3) issues is important not only with respect to the countries concerned, but also in establishing the precedent for developing countries, where data exclusivity is presently non-existent and could be extremely valuable.

The Role of USTR

For Special 301 to be useful in all of these countries, we believe that there has to be increased pressure from the U.S. Government to put a halt to unauthorized copying of patented products, which represents expropriation of the private property of U.S. citizens. We hope that USTR will not hesitate to exert such pressure this year, and to seek finally to bring these countries to account for the patent theft they so brazenly have allowed.

We ask USTR to consider all possible policy avenues for ensuring the establishment of intellectual property laws in countries where they do not now exist, ensuring proper enforcement of existing laws, and preventing delays by countries which previously committed to improvements in their existing patent regimes but have failed to deliver on these promises. We believe that the leverage of "Special 301" continues to be a significant policy tool for United States trade policy, and an effective complement to activities undertaken in multilateral fora, such as the WTO.

Please do not hesitate to contact me or my staff if we can provide further information on any of the countries mentioned in our submission.

Sincerely,

Shannon S.S. Herzfeld