[Ip-health] O Globes: Breakdown of the Israel-US talks on drugs IP is costly for both sides

[Mike Palmedo]

Far apart - The breakdown of the Israel-US talks on drugs IP is costly
for both sides.

Hadas Manor
O Globes
2 Dec 04

The failure of the discussions with the US on patent protection and data
exclusivity for prescription drugs can be attributed to rumors that US
Trade Representative Robert Zoellick will be replaced. Zoellick took a
conciliatory position in the talks with Israel regarding protection for
the intellectual property of US pharmaceutical companies.

Zoellick was opposed by US assistant secretary of commerce for market
access and compliance William Lash, whose stance was much tougher.
Zoellick is also considered friendly to Minister of Industry, Trade, and
Labor Ehud Olmert. Olmert believed that an agreement on the issue would
be reached; otherwise, he is would not have taken the trouble to
accompany the professional teams to Washington.

A professional US sources told =93Globes=94 that Embassy of Israel in
Washington DC Minister for Economic Affairs Boaz Raday held that lack of
time had had a bad effect, causing minor disputes between the parties.
Ministry of Industry, Trade and Labor foreign trade administration
deputy director-general Ronit Kan said in a phone call from Washington
yesterday, =93Progress was nevertheless achieved in the negotiations.=94 Th=
e
source added, however, that the dispute between the parties was
significant and a matter of principle, and could not be bridged.

The Pharmaceutical Research and Manufacturers of America (PhRMA), which
represents US ethical drug companies, led by Pfizer (NYSE: PFE), asserts
that one of the main reasons why Israel should enact a data exclusivity
law is that 25 innovative medical products belonging to international
companies are not registered in Israel, because of the lack of proper
protection.

Take, for example, Oxilaplatin, a drug developed by Aventis (NYSE: AVE;
LSE: AVN; XETRA, Paris: AVEP) for treatment in the early stages of
cancer, which has received clinical approval in Europe. Israeli health
funds currently import the drug under Regulation 29C, which authorizes
parallel imports of drugs not registered in Israel.

Lack of registration in Israel prevents the inclusion of drugs in the
health basket of drugs to which everyone is entitled. This means that in
the future, Israeli generic companies, headed by Teva Pharmaceutical
Industries Ltd. (Nasdaq: TEVA; TASE: TEVA), will be unable to produce a
generic replacement. Development of a generic version is much cheaper
than the $900 million cost of developing an ethical drug.

Concern on the part of international companies is not confined to the
export of unprotected drugs to Israel. They are also concerned that Teva
and other Israeli companies will be able to produce generic versions of
their drugs in Israel, and export their generic versions to any country
in which there is no data exclusivity. The international companies claim
that this is exactly the reason why Teva does not export its Copaxone
ethical multiple sclerosis drug to India because there is no data
exclusivity there.

Meanwhile, the main dispute between Israel and the US is over the fact
that the Israeli bill does not stipulate that all medical preparations
not registered in Israel will henceforth be awarded exclusivity
protection for five years. Only preparations registered in the world
from January 2006 will be awarded such protection. The US is demanding
that exclusivity be applied to any product registered in the world,
starting in 2000 and not registered hitherto in Israel, for which
registration in Israel has now begun.

Another key dispute is the date on which the exclusivity period in
Israel begins. Hundreds of millions of dollars are at stake in this
issue for both sides. The US is demanding five full years of
exclusivity, starting when a drug is registered in Israel. Israel wants
the period to begin when a drug is registered in one of the overseas
=93drug-selling countries=94 (mostly the US and the EU). This will cost US
companies sales during the 6-9 months from the time a drug is registered
overseas and registration of the drug in Israel. During this period,
Teva can sell a generic version that is vastly cheaper than the original
drug in Israel, and also in the US market.

The cost to Israel of accepting the US demand to the detriment of Teva
is clear Teva will transfer production in this period to the US, where
exclusivity has already expired. Israel will lose hundreds of jobs,
foreign currency from exports, and tax revenues, as well as incurring
damage to its leading industry.

What lies ahead

The US will find it difficult to downgrade Israel in its rating of
countries violating intellectual property rights. In any case, the
decision depends to a large extent on whether Zoellick, who makes the
final decision on this question, is replaced. Israel is currently only
on the second list, not the third and fourth, which include countries
with severe violators under threat of commercial sanctions from the US.

Another possible result could be a lack of US support for Israel=92s
accession to the Organization for Economic Cooperation and Development
(OECD). The European Union is also liable to delay co-opting Israel into
its plan for the European Economic Area (EEA).