Intellectual Property Protection

In May 1996, Brazilian President Fernando Hernrique Cardoso signed into law a bill designed to protect industrial property (No. 9279/96), containing language which includes among other provisions a 20-year product patent term; pipeline protection for products in the approval process; basic biotech in line with GATT-TRIPS; a ban on parallel imports; and a one-year implementation period (TRIPS allows Brazil until 2005).

Reflecting its confidence in Brazil and recognition of the significance of what was regarded as a generally strong law, the research-based pharmaceutical industry committed in the neighborhood of US$ 2 billion in inward investment to Brazil by 2000. However, in enacting the law, Brazil included a provision which prohibits importation as a means of satisfying the requirement that the patent be "worked" in that country. Article 68 of the Brazilian Industrial property law requires domestic exploitation of the subject matter of a patent. Importation may only satisfy this requirement if local manufacture is not feasible, inconsistent with the terms of TRIPs Article 27. Our industry is increasingly concerned about this provision, as hopes that it could be resolved quickly at the local level have faded, and the threat becomes more immediate.

This is further aggravated by the October 6, 1999 issuance of a Presidential Decree regulating the implementation of Article 71 of the law, which governs the grant of compulsory licenses in broadly defined situations of national emergency. Beyond any definition-related concerns, this particular decree is troubling because of the absence of any dialogue with industry prior to its publication, the broad discretionary powers given to officials below the presidential level, the apparent inconsistency with TRIPs obligations, and subsequent potential benefit to domestic manufacturers, and the mandatory transfer of technology considered in Article 5.

Additional inconsistencies have been identified in various exclusions from patentability, forfeiture of patent rights, term of protection, and the absence of protection against unfair commercial use.

We also believe that adequate and effective implementation of aspects of the law consistent with Brazil's international obligations is critical. As such, our industry reiterates its endorsement of actions that will support education, training, and other activities of members of the National Institute of Industrial Property (INPI).

Brazil is the largest market for pharmaceuticals in South America, and enhanced patent protection will significantly benefit the U.S. research-based pharmaceutical companies, which lose hundreds of millions of dollars annually to patent piracy around the world. Brazil's improved patent protection regime had started to become a positive example for the developing countries in Latin America and worldwide with inadequate patent protection. Brazil should understand that If it is to retain international investor confidence, particularly from an industry that has responded by investing large amounts of new capital into Brazil, it is important to send a consistent , coherent message. In this regard, in addition to addressing the aforementioned issues, it would be useful for INPI to improve its approval of pharmaceutical patents applications, including the precedent-setting pipeline patents, committing institutional resources to better address the existing backlog. Other steps for improving the level of intellectual property protection can be taken by establishing "linkage" requiring an interface between the Patent Office and the Board of Health, safeguarding pharmaceutical confidential data, consistent with Brazil's TRIPS obligations by 2000.


PhRMA companies are extremely concerned regarding newly introduced requirements (Medida Provisoria 1912-9, of the new Agencia Nacional de Vigilancia Sanitaria, dated October 28, 1999), which gives the agency broad powers to monitor and potentially control prices. This concern extends to the initiation of wide-ranging congressional inquiries into pharmaceutical pricing.

Potential Exports/Foreign Sales

It is not possible at this time to determine the impact on sales of PhRMA member company affiliates in Brazil if the aforementioned provisions were strengthened and renewed pricing concerns resolved. As a result of Brazil's financial crisis, compounded by some of the measures described, the Brazilian market could decline in excess of 15 % from the estimated value US$ 7.8 billion in 1998.