(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 fell 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 began to file product patent applications, and the products that are the subject of these applications are beginning to come to the market. The risk of patent piracy remains high, so long as the approval process continues to suffer administrative and other delays. The adoption of "linkage" regulations would help to ameliorate this situation, requiring that "second applicants" (i.e., generic, or in some cases, "pirate" applicants) demonstrate that the product for which they are requesting 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. As is described in several other country sections in this submission, 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.
Over the course of the past two years, Andean countries have met to negotiate at a technical level on at least ten occasions, in order to prioritize and address deficiencies in the regime to bring Decision 344 into compliance with TRIPs obligations. An additional round and an ensuing Vice Ministerial, originally scheduled for late November, were cancelled and the handling of several critical issues remains uncertain.
Most notable among these are issues are the patentability of use and second use (second use is expressly excluded from patentability by Article 16 of Decision 344), data confidentiality (current provisions have a loophole that facilitates national authorities issuing marketing approval of "copy" products), patentability of biological materials (Article 7 excludes the patentability of inventions related to the human body. The patentability of matter already existing in nature is also forbidden, irrespective of modifications and value added through biotechnology), and international exhaustion of patent rights (under current provisions the patent holder cannot prevent a third party from importing and selling a patent-protected product in the country where the patent was granted. This situation would remain under the terms of Article 60 of the modification proposal, facilitating parallel imports and undermining the value of the patent).
Since the current patent regime went into effect in 1991, only a few patents have been examined and granted, and the process remains extremely slow.. 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.
Even though prices were liberated in February 1999, this was done with one significant caveat, that at least three identical molecules be available in the marketplace. Products that do not have copies in the marketplace (less than three) remain under the price controls, with once a-year-adjustments determined through an unclear methodology. This policy has maintained pharmaceutical prices well below the devaluation rate and several points below the expected level of overall inflation, a trend that jeopardizes industry sustainability.
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.
Despite the fact that Ecuador issued and notified an initial group of pipeline patent applications, consistent with its bilateral agreement with the United States, and that an Intellectual Property Protection Law was approved in May 1998, serious concerns remain.:
Under pressure from the Andean Secretariat and Tribunal, as well and local industry, the Ecuadorean Government not only failed to issue additional pipeline patent applications; but advised companies, through the newly created Intellectual property Institute (IEPI), that the approximately 120 pending pipeline applications, dating back to 1994, were being rejected.
Third parties continue to profit 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 have been addressed through regulations, these fail to address the aforementioned concerns, and are limited to procedural rather than substantive issues. The industry was not afforded the opportunity to provide input in the drafting process.
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.
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
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.
In a positive development, based on Peru's legislation on data exclusivity, the Peruvian Patent Office (INDECOPI), has made decision enforcing a patent against pirate copies and requested that the regulatory agency (DIGEMID) withdraw the copies from the market.
Based on the terms of a 1998 ruling by the Andean Secretariat, Peru has lso acted to recognize the patentability of second uses.
Legislation on Medicines
It is cause for concern that INDECOPI, in collaboration with the Ministry of Health, is now supporting a campaign advocating the substitution of physicians prescriptions, without consideration of the absence in Peru, of bioavailability or bioequivalency analysis necessary to ensure the therapeutic capacity of generics or copies. The General Health Law (# 26840) empowers the pharmacist to suggest alternatives, but it had not been a significant issue to date, as a result of the objections of the medical and other professional associations.
A draft industrial property law meant to bring Venezuela into compliance with its international obligations was approved in the Chamber of Deputies in early November 1999. The bill, as drafted, did not specify the rights of patent holder; rather, it was limited to referencing the international agreements binding the country, including TRIPs, the Paris Convention, and Andean Decision 344.
While the language was expected to eliminate any potential conflicts, sectors of the Administration, responding to a strong media campaign undertaken by national laboratories, withdrew political support for the bill. Consideration of this bill, or an alternative is thus left to a new National Assembly, that will substitute the current Congress once the new Constitution has been approved.
The bill did contain some important deficiencies, most notable among them, the punitive use of compulsory licensing for lack of local working of a patent, along the same lines as considered in the ongoing review of Decision 344.
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.
Legislation on Medicines (Ley de Medicamentos)
Last year, 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 Congressional. A more positive bill, drafted by various interested groups, including the research-based pharmaceutical industry, is under consideration, but there is significant concern that it could easily be killed in remaining days of the current session.
Potential Exports/Foreign Sales
The value of the Andean pharmaceutical market reached US$2.9 billion in 1995. If barriers were removed, PhRMA members' sales increase would lie in the range of US $100 million to US $500 million.