Intellectual Property Protection

In early 1999, the Government of Israel passed into law amendments to the Pharmacists' Act that, if implemented, would allow 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. We are encouraged by Minister Beilin's statements that he remains concerned that implementation of the law may conflict with Israel's international IP obligations, and his continuing review of the draft implementing regulations. There are also reports, however, that the Government of Israel hopes to implement the current regulations without substantial change subsequent to the completion of U.S.T.R's December Out-Of-Cycle Review conducted as part of the "Special 301" process. 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. 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 that the GOI's TRIPS Omnibus legislation that is currently under consideration in the Knesset lacks critical data protection provisions that are required by TRIPS Article 39.3, and fails to provide adequate provisional and border measures required by TRIPS Articles 50 - 60 in order to deter infringement and counterfeiting activities.

In 1998, the Government of Israel amended the patent law to allow local companies that are not patent owners or licensees to manufacture patented material prior to expiration in order to submit registration data to health authorities in Israel, and other countries which allow similar pre-expiration activities for marketing approval. Implementation of this law allows Israeli manufacturers who do not have any rights to the patent to conduct large-scale manufacturing in Israel during the life of the originator's patent. Although the law is designed to permit the manufacture and export of patented medications for the limited purpose of applying for marketing approval, because the Israeli government has not established any effective enforcement mechanisms to prevent abuse of this provision, companies may manufacture and export large quantities of pharmaceutical products during the period of patent protection.

The law has, in effect, significantly shortened the period of patent protection for pharmaceutical products (which discriminates between technologies and so may violate TRIPS), and so reduces patent protection in Israel. The effective period of patent protection in Israel is now approximately five years, the shortest patent terms in any developed country except Canada. Notably, the EU has launched a WTO complaint against the Canadian system.

Potential Exports/Foreign Sales

Given that the threat of parallel importation on patented pharmaceutical products is not in place, it is difficult to estimate potential damages. But 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.

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% of the market - i.e. $400 M in patented imported products. Members of the research based pharmaceutical industry in Israel currently employ 700 people; many may lose their jobs. 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.

In sum, parallel importation brings with it the attendant risk of significant job losses in Israeli PhRMA members, curtailed participation by Israeli doctors and scientists in clinical trials, and reduced incentives for new biotech investment by foreign firms. All of the foregoing could have adverse impact on public health and safety outcomes. Good medicine relies on the availability of skilled personnel and resources.