PRIORITY WATCH COUNTRY
Andean Community (Bolivia, Colombia, Ecuador, Peru, Venezuela)
Intellectual Property Protection
As of January 1, 1994, the Governments of the Andean Community adopted Decision 344, which improved former Decision 313 in providing a 20-year patent term, reversal of the burden of proof in cases of alleged patent infringement and immediate implementation.
Decision 344 gave each member of the Andean Pact the freedom to strengthen its respective industry property rights legislation as well as regulate aspects on industrial property not dealt with in the Decision (Articles 143 and 144). On the other hand, Decision 344 falls short of providing strong pharmaceutical patent protection because of the following major flaws:
- no protection for products in the pipeline;
- open-ended compulsory license language;
- international exhaustion of rights;
- unjustified restrictions on biotech inventions.
As a result of Decision 344, however, pharmaceutical companies have begun to file product patent applications, and the products that are the subject of these applications are beginning to come to the market. Few patent applications, however, have been acted upon, and until those applications are approved, innovative pharmaceutical companies remain at risk from patent piracy. One way in which this situation could be ameliorated, is to require that "linkage" regulations be adopted in the Andean Pact countries. "Linkage" would require that "second applicants" (i.e., generic, or in some cases, "pirate" applicants) be required to demonstrate that the product for which they are applying for market approval is not the subject of a valid patent or pending application. "Linkage" exists in the United States and Canada, and has proven to be a useful adjunct to maintain the integrity of the intellectual property and patent system.
A second way in which the intellectual property environment could be improved in the Andean Pact, until adequate and effective de jure patent protection is in place, is for these countries to implement and enforce provisions guarding against the unauthorized commercial use of company proprietary data, as per the principles outlined in TRIPs Article 39. Allowing the registration of "generic" products that use, or incorporate by reference, the company proprietary data of the innovator is an unfair trade practice that severely if not completely undercuts intellectual property protection for pharmaceuticals. The Andean Pact should adopt a ten-year period standard against the use of proprietary data submitted for registration purposes, as is the case in several EU countries.
Andean Pact countries have an opportunity to demonstrate true commitment to intellectual property protection and to TRIPs compliance by prioritizing and resolving the deficiencies identified during ongoing technical level meetings to modify Decision 344.
Since the current patent regime went into effect in 1991, only a few patents have been examined and granted. The Government of Colombia needs to take steps to:
- improve the operational structure of the patent office;
- improve enforcement mechanisms to handle patent infringement issues;
- create linkage regulations between the regulatory and patent offices;
- implement pertinent judicial training programs.
Despite the fact that Ecuador issued and notified an initial group of pipeline patent applications, and that an Intellectual Property Protection Law was approved in May 1998, serious concerns remain:
- No additional pipeline patent applications have been notified since May. The vast majority remain pending, and expectations are minimal regarding additional progress.
- Third parties are profiting at the expense of originator companies, as the Government of Ecuador has allowed the registration of copies of PhRMA company products included in the pending pipeline.
- Deficiencies and ambiguities were detected in the new law, particularly as pertains to the establishment of international exhaustion, the authorization of parallel importation, the undercutting of data exclusivity, and the absence of specific provisions for pipeline protection in the law.
- While it is possible that at least some deficiencies could be addressed through regulations, it is unclear whether or not recently passed implementing regulations address the deficiencies identified.
- An essential institutional component, the Instituto Ecuatoriano de Propiedad Intelectual (IEPI), provided for under the new law, is not fully operational.
Since passage of Law 100 in 1994, ethical pharmaceuticals have remained under price controls. Colombia has maintained its policy of price controls for medicines which limit price increases to a preset annual percentage, well below the devaluation rate and several points below the expected level of overall inflation, a trend that jeopardizes industry sustainability.
All pharmaceutical pricing is governed by Law 152, establishing, among other things, that pharmaceutical companies can earn up to 20 % profit over real costs when commercializing medicines. However, as the Pricing Committee arbitrarily sets limits for costs and Decree 1076, issued to regulate Law 152, arbitrarily establishes ceilings for margins, there is a contravention of international accords subscribed by Ecuador in joining WTO, in which the country expressed an intention to eliminate all measures preventing price development and expansion.
Despite drastic market reforms which lifted price controls for most industries, the pharmaceutical industry remains the target of political maneuvering. To date, only over-the-counter (OTC) medicines and products with more than four alternatives in the market have been liberated, while the prices for products that are most significant for the research-based industry continue to be heavily controlled.
The health Code requires that all medicines receive approval through health registration procedures as well as apply to be approved for pricing. This rule does not extend to "natural products" and homeopathic compounds, constituting a discriminatory practice against pharmaceutical products.
Legislation on Medicines (Ley del Medicamento)
The Colombian Government has maintained its predatory policy to promote non-branded pharmaceuticals at the expense of those produced by multinational companies. Law 100 establishes that the Colombian population will be covered by either the Social Security or a Health Promoting Entity (EPS), and pharmaceutical products will be supplied based on a list of only 307 generic substances. This law, already enforced, has dramatically affected the private brand name market.
A draft bill has been presented to Congress with a comprehensive proposal for medicines, including multiple disturbing elements, among them:
- obligations for physicians to prescribe a generic product along with the branded product;
- obligations for public institutions to purchase generic compounds over branded compounds;
- obligations for companies that sell to public institutions to sell to private channels at the same price.
At last report, the bill was being discussed in Committee and was considered to have a good chance of passing.
A draft bill promoting substitution of prescriptions at the pharmacy level, Ministry of Health intervention in pricing, and stimulation and production of generics failed on September 30, 1998, the last day of the past Congressional session. There is significant concern that a similar bill will be advanced and considered by the new Congress elected November 8.
Potential Exports/Foreign Sales
The value of the Andean pharmaceutical market surpassed US$2 billion in 1995. If barriers were removed, PhRMA members' sales increase would lie in the range of US $100 to $500 million.
For all the aforementioned reasons, PhRMA believes that the countries comprising the Andean Community should be listed as Priority Watch Countries under Special 301 in 1999.