[Ip-health] FT: Drugs IP/ "Israel v. the World"

[Mike Palmedo]

http://www.e-topics.com/index.asp?layout=topic_story&UserID=20020904121936145733&topic=2897&display=&doc_id=a0203395.2iw

Drugs IP/ Israel vs. The world
February 7, 2005

[Globes. Source : Financial Times Information Limited.]

ISRAEL BUSINESS ARENA via NewsEdge Corporation : In 1998, Amendment 3 to
the Patents Law (1967) (popularly referred to as the Teva amendment),
was published. The amendment dealt in two ways with the protection and
exclusivity period for patents, which begins on the date a patent
request is filed and, under Section 52 of the law, continues for 20 years.

On the one hand, ethical drug manufacturers, who have spent years
developing their drugs, are entitled to request and obtain a ruling from
the Israel Patent Office extending the patent term for a particular
medicament listed in the Israel Registry of Drugs for up to five years,
with certain restrictions. One of the material restrictions is that the
total period of protection (under the basic patent and the extension
ruling combined) ends no later than fourteen years from the date on
which the first marketing license is granted in a member state. A member
state is defined as either a member state in the Union for the
Protection of Industrial Property (created by the Paris Convention for
the Protection of Industrial Property - 1883), and/or a member state in
the World Trade Organization.

On the other hand, the amendment enabled the generic drug industry,
which makes drugs that are identical substitutes for drugs whose patent
protection has expired, to begin preparations for producing generic
drugs during the patent protection period. These preparations include
conducting trials for the purpose of obtaining a license for generic
drugs to enable the commencement of marketing immediately following the
patent protection period.

One of the main justifications for this amendment, as stated in the
preamble to Amendment 3, was to prevent a situation that frequently
arises in the drug industry, in which the patent owner obtains an
additional defacto exclusivity period beyond the patent period. This
additional exclusivity period is the result of patent restrictions on
competing manufacturers (generic drug producers) denying them the legal
right to commence with trials and preparation of the data package
required for obtaining a license before the end of the patent period.
Such preparations take on the average about three years thus a defacto 3
year extension for a given ethical medicament.

Israel thereby joined a long list of countries, including Japan,
Germany, and the US, in which generic drug developers are permitted to
conduct preparations for obtaining a license during the patent
protection of the ethical drug.

Despite the attempt in the Patents Law amendment to provide for the
economic interests of both the generic and ethical drug industries, the
amendment contains many flaws, which give rise to varying legal
interpretations by the parties each of which havng it's own financial
interests at stake. The clear economic consequences of this dispute over
interpretation have become sharper because of the cyclical nature of the
patents market, particularly now since, over the next few years, many
patents are due to expire, creating great potential for generic
companies to increase their share of the pharmaceutical market.

The Wyeth decision

One of the disputed issues discussed during the handling of objections
to requests for patent extensions, is the authority of the Patent Office
under the 1998 Amendment to issue extension orders for medicaments that
were listed in the Israel Register of Drugs before the amendment came
into force.

In December 2003, Wyeth applied for a patent term extension of a patent
describing a drug registered in the Israel Register of Drugs about two
years before the amendment came into force. The Deputy Commissioner of
Patents decided, in favor of Dexcel and Teva, who opposed Wyeth's
request for extension, thus rejecting Wyeth's extension application.

In his decision the Deputy Commissioner of Patents concluded that the
basis of the amendment was the legislator's intention primarily to
eliminate the disadvantage suffered by the Israeli generic industry
vis-a-vis its competitors in other countries that permitted clinical
trials for licensing purposes during the patent protection period. The
Deputy Commissioner further ruled that the transitional provisions to
the amendment should be interpreted to give a certain advantage to
generic companies and therefore a patent protecting a product that was
registered more than 60 days before the amendment came into force, could
not be extended.

The Deputy Commissioner further ruled that this interpretation to the
transitional provisions did not impair Wyeth's proprietary rights, since
the issue discussed in this legal dispute was not whether Wyeth was
eligible to a patent term extension before the amendment was enacted,
but rather whether any medical product that was registered before the
amendment is entitled to a patent term extension. Consequently, no basis
existed for the claim that the transitional provisions harmed Wyeth's
right to equality with other patents owners whose licenses for protected
products were granted after the amendment was enacted, or within the 60
days preceding that date.

Finally, the Deputy Commissioner of Patents ruled that any violation of
equality was in due measure, taking into account other worthy economic,
social, and national interests, in the expectation that the public would
reap substantial benefit from the amendment, specifically the
availability of important drugs earlier at substantially lower prices,
while the public interest in encouraging drug manufacturers to invest in
R&D for new drugs would not be compromised, because ethical drug
manufacturers could be compensated by patent extensions for the
prolonged licensing procedures and the expedited entry dates for of
competing drugs into the market.

The international character of the dispute

The decision of the Deputy Commissioner dealt with only one aspect of
the interpretive dispute concerning the third amendment to the Patents
Law and illustrates the balance of forces between the two sides of the
issue on the eve of the amendment.

The amendment was an attempt, albeit an unbalanced one, to deal with the
opposing demands and interests of two sectors: the generic drug
manufacturers, headed by Teva, and the ethical drug manufacturers,
almost all of which are based outside of Israel The amendment as such
was inadequate as a broad solution to the dispute between the opposing
parties.

The interpretative problems created by the amendment along with the
immediate and dramatic consequences of the dispute on the pockets and
welfare of Israeli drug producers and consumers alike motivates each of
the two sides to continue in its attempts to try and tilt the scales in
its favor.

For example, the ethical drug companies assert that adequate protection
for the longest possible term will encourage the registration and
marketing of many more new drugs in the Israeli market, including
innovative and life-saving drugs, and will enable those drugs to be
included in the National List of Reimbursed Drugs. Additionally, proper
protection will allegedly increase investment in Israeli-based R&D by
the ethical drug companies themselves by over $200 million per year,
thereby creating new jobs.

On the other hand, the generic companies say that it is a public
interest of the highest importance to promote the marketing of generic
drugs in Israel of in the shortest possible time. This will make drugs
available to the Israeli public earlier at substantially lower prices.

It is important to realize that the intellectual property arena in
Israel is not just a local one. In fact, many foreign companies register
patents with the Israel Patent Office. As of 2000, only 30% of the
patent applications filed in Israel were by Israelis. 50% originated in
the US, and 10% in Germany.

The following are two of the reasons why foreign companies register
patents in Israel: Registering a patent in Israel will enable a company
to conduct legal proceedings that will potentially affect patents in
other countries (for example, countries to which the Israeli generic
drug industry exports drugs); Furthermore, since Israel is a member of
the Patent Cooperation Treaty (PCT), including Israel in an
international patent application is facilitated.

This is why the ongoing struggle to shape the statutory and legal
elements of the Israeli patent market has far reaching international,
commercial, and even political features. It is no wonder that the
Israeli legislators find themselves in the middle of a complicated power
struggle. The legislators are exposed to pressure exerted not only from
Israeli pharmaceutical companies, but also from multinational
pharmaceutical companies, as well as US political entities, and the
European Union (EU).

The current balance of forces on the issue and international pressure
being exerted on Israeli legislators can be seen in two legislative
initiatives currently being formulated and described below.

Patents Law Amendment Extension of Term of Basic Patent

The background to this latest bill for amendment to the Patents Law is
the vague formulation of the 1998 amendment to the law, which led to the
complicated legal disputes in the years since the amendment was passed
discussed above, and the need for clarifications with respect to patent
extension orders.

An examination of the bill and the critical clarifications it sets forth
, indicates that the future ability of ethical drug companies to apply
for and receive extension term rulings, which the previous third
amendment restricted, will soon become even more restricted and conditional.

Firstly, in the new bill an additional condition renders it impossible
for an ethical drug company to file an application to extend a patent
term in Israel unless a similar application has been filed in another
permitting state. A permitting state is defined as one that permits
actions for obtaining a license before the patent term has expired.
Furthermore, the Patent Office will not be able to grant an extension
ruling unless the permitting state has already approved the application.
Secondly, to remove any doubt, the amendment stipulates that the patent
term extension will be equal to the shortest extension granted in
another permitting state. Thirdly, the Patent Office no longer has the
authority to extend the deadline for submitting a patent term extension
application (the deadline is currently 60 days after a medicament has
been registered).

It appears that acceptance of this amendment in its present form, will
be indicative of further support to the claims of the generic drug
companies.

Published by Globes [online] - www.globes.co.il - on February 3, 2005