[Random-bits] PhRMA’s Aggressive Special 301 submission for the Philippines

[James Love]

http://www.keionline.org/blogs/2009/03/12/phrma-philippines-301/


PhRMA’s Aggressive Special 301 submission for the Philippines
By James Love, on March 12th, 2009

One of the more aggressive PhRMA submissions to the USTR Special 301
list is the section on the Philippines. Excerpts, which are given below,
illustrate the breath of PhRMA’s demands on the USTR. In this case, the
Philippines is cited for not patenting new uses of old drugs, and for
allowing for compulsory licenses where “Where the demand for patented
drugs or medicines is not being met to an adequate extent and on
reasonable terms.” PhRMA overstates the TRIPS requirements and standards
for prior negotiation with patent owners (understating what constitutes
an anticompetitive practice under the TRIPS), and insists on the
increasingly discredited TRIPS plus system “linkage” of patents to drug
registration. PhRMA asks the USTR to impose overly restrictive
regulatory barriers to parallel trade in medicines. PhRMA is opposed to
the Philippines legislation to regulate maximum prices for drugs,
opposes greater transparency of drug pricing, and opposes Philippine
efforts to educate consumers on the bio-equivalence between generics and
brand name products.

---------------

PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA (PhRMA)
SPECIAL 301 SUBMISSION 2009

PHILIPPINES

PhRMA and its member companies operating in the Philippines are
increasingly concerned about the deterioration of the intellectual
property protection environment and the failure of the Philippine
Government to address PhRMA’s long-standing issues. PhRMA’s members’
most pressing concerns relate to the implementation of the Universally
Accessible Cheaper and Quality Medicines Act of 2008 (“the Act”).
PhRMA’s concerns regarding the drafting of this Act and its implementing
rules and regulations (IRRs) were not considered or addressed by the
Government, and the IRRs contain several provisions that are
inconsistent with the Philippines’ obligations under the WTO Agreement
on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In
addition, PhRMA’s member companies continue to face numerous issues
related to patent linkage, parallel importation, data protection,
counterfeit drug enforcement, regulation of drug prices, and the
labeling of unbranded generics. For these reasons, PhRMA requests that
the Philippines be designated as a Priority Foreign Country for the 2009
Special 301 Report and that the U.S. Government continue to seek
assurances that the problems described herein are quickly and
effectively resolved.

Intellectual Property Protection
TRIPS-Related Concerns
Of significant concern to PhRMA member companies are IP-related
provisions in the Act that amend the Philippines Intellectual Property
Code to severely limit the patentability of new forms and uses of drugs
and medicines. This limitation on patentability only applies to new
forms and uses related to drugs and medicines, and therefore is
inconsistent with TRIPS Article 27.1, which requires that patents be
made available without discrimination with respect to the field of
technology.

The Act creates a new ground for compulsory licensing under existing
Philippine law: “Where the demand for patented drugs or medicines is not
being met to an adequate extent and on reasonable terms, as determined
by the Department of Health.” This new ground for compulsory licensing
is applicable only to drugs and medicines and, therefore, is also
inconsistent with the nondiscrimination requirements of Article 27.1 in
TRIPS. In addition, if this new ground is utilized, the Act waives the
requirement under the IP Code (and the TRIPS Agreement) that a
compulsory license can only be granted after the petitioner for the
compulsory license has made efforts to obtain authorization from the
patent owner on reasonable commercial terms and conditions over a
reasonable period of time.

Under Article 31 of TRIPS, a WTO member can only waive the requirement
to make efforts to obtain authorization from the patent holder on
reasonable commercial terms and conditions before issuing a compulsory
license in three specific cases: 1) a national emergency or other
circumstances of extreme urgency; 2) public non-commercial use; 3) to
remedy anti-competitive practices. Because the new basis for a
compulsory license is not within the specific and limited exceptions
provided under TRIPS Article 31, this amendment is inconsistent with
TRIPS. In addition, provisions in the Act suggest that the safeguards
related to compulsory licenses required by TRIPS Article 31 would not be
preserved. TRIPS-required safeguards have been removed by: 1) deleting
the provision in Section 74.2 of the current IP Code which
cross-references TRIPS Article 31 safeguards; and 2) enumerating only
certain safeguards while specifically excluding other Article 31
safeguards.

Patent Linkage
Three years ago, the Philippine Government, through a DOH Administrative
Order (A.O. No. 2005-0001) removed the patent linkage system and
intellectual property protection, in general, from the responsibilities
of the BFAD. The Administrative Order permits the BFAD to accept and
process applications for product registration without the need to verify
whether or not the pharmaceutical being submitted for registration is
under patent protection. Moreover, even if the BFAD is made aware of a
valid patent, it is “exempted” from honoring such patent and can grant
approval for marketing of the infringing product. As a result, the only
available option for PhRMA member companies is to pursue legal remedies
to protect their product patents, which in the current legal system can
result in great expense, long delays and economic injury before a
decision is made. This is especially troubling, as the Philippine
courts/judges are hesitant to issue preliminary injunctions to stop the
infringing activity. The elimination of this linkage and the subsequent
adoption of a Bolar-type exception as provided by the Act may result in
more injuries to patent owners, which may not be easily remedied by
court actions.

Parallel Importation
Under the new Act, all government agencies and third parties now have
the authority to parallel import patented drugs and medicines. This
broad authority heightens serious concerns related to the lack of
adequate infrastructure and monitoring mechanisms in the Philippines to
ensure the safety of parallel imports and prevent the importation of
counterfeits, as well as concerns over mishandling (which can lead to
contamination of the drugs). In addition, PhRMA’s member companies have
raised concerns regarding the risk of an increased flow of counterfeit
drugs into (and out of) the Philippines due to an inadequate monitoring
process.

The Act fails to address these concerns, which are exacerbated by an
administrative order permitting the Philippine International Trading
Corporation (PITC) to import pharmaceuticals from India and Pakistan
using “substitute requirements” and via a “priority lane”.
Administrative Order (A.O.) No. 85 enables the Government, through the
PITC, to import branded, off-patent medicines and exempts the PITC from
complying with standard regulatory requirements, potentially
compromising patients’ safety. It also permits an expedited review for
pharmaceutical registration. A.O. No. 85 grants an unfair advantage to
PITC, which directly competes with U.S. pharmaceutical companies, by
permitting PITC to import and sell medicines to the public without
complying with strict registration and testing requirements required of
innovative pharmaceutical companies. If this procedure continues, and if
private parallel importers are granted the same benefit, foreign drug
manufacturers and suppliers will face even greater discrimination in the
Philippine market. Provisions related to parallel imports in the final
IRRs of the Act also raise concerns. Rule 9(i) of the final IRRs
broadens the scope of drug and medicines that can be brought into the
Philippines as non-infringing parallel imports by establishing
international exhaustion of the patent holder’s exclusive rights at the
point that the drug or medicine has been sold or offered anywhere else
in the world, even without the authorization or permission of the patent
holder. This opens the possibility that drugs and medicines first
introduced by an unauthorized sale, or subject to a compulsory license,
could be brought into the Philippines as a non-infringing parallel
import.

Market Access Barriers

Concerns Related to the Maximum Government Price Control System and
“Cost- Containment Measures”
The government price control regime implemented under the Act poses
serious transparency concerns. Under the Act, the President of the
Philippines has the power to impose maximum retail prices upon the
recommendation of the Secretary of the Department of Health
(“Secretary”). The Act provides the President of the Philippines
authority to impose drug price ceilings in times of true calamity,
public health emergencies and illegal price manipulation. The President
can also impose maximum retail prices (MRPs) in “other instances of
unreasonable drug price increases,” which remain undefined in the law.
The Secretary is given expansive and relatively unfettered powers to
establish a price monitoring and regulation system, as well as other
broad “cost containment measures.” The Secretary is required to consider
several factors in setting a maximum price for the President’s approval,
including foreign price referencing. While there is a mandate to
consider these circumstances when setting a MRP, the Secretary is not
required to conduct hearings or take into account stakeholder comments
to ensure the reasonableness of a proposed MRP. There is a
non-exhaustive list of the types of drugs and medicines that are subject
to governmental price regulation. The Secretary has unfettered
discretion to add any additional drugs or medicines to the list.

Despite the fact that the Act authorizes the DOH to establish advisory
bodies and councils to facilitate stakeholder input for the MRP system,
the final IRRs do not provide for an established mechanism to facilitate
stakeholder input, or to ensure that stakeholder input will be taken
into account.

GATT Article III paragraph 9 states that members implementing maximum
price control measures “shall take into account the interests of
exporting contracting parties.” The final IRRs only provide the DOH the
discretion to create advisory bodies and consultative councils for the
implementation of the MRP system. Given the significant impact that the
MRP system will have on all pharmaceutical manufacturers and other key
stakeholders such as patients and health care providers, PhRMA and its
member companies recommend that the DOH be required to establish and
utilize advisory bodies and consultative councils in order to facilitate
and ensure stakeholder input, and to ensure that stakeholders are
separately and adequately represented on those advisory bodies and
councils.

The Act also contains provisions that place additional burdens on
research-based pharmaceutical companies in the Philippines. These
include: (1) specific labeling requirements, including maximum retail
price and notification that medications are subject to government price
regulation; (2) a requirement to issue a price list for drugs and
medicines to distributors, wholesalers, retailers and the Secretary,
indicating retail prices, MRPs, “and such other information as may be
required by the Secretary”; and 3) a requirement that every
manufacturer, importer, trader, distributor, wholesaler, or retailer of
a drug or medicine provide to the Secretary within 30 days from the
effective date of the Act, and then by December 31 in subsequent years,
a list of the corresponding prices and inventories of all drugs or
medicines it manufactures, imports, trades, distributes, wholesales, or
retails, and “any and all necessary information that Secretary may
require.”

Labeling/Unbranded Generics
The Act amended the Generics Act to require that the following statement
appear prominently on generic drug labels: “This product has the same
therapeutic efficacy as any other generic product of the same name.
Signed: BFAD.” This requirement raises serious public health concerns
because the BFAD is currently unable to test for the bioequivalence of
products. The Act also requires drug manufacturing companies to make an
“unbranded generic counterpart of their branded product widely”
available to the general public. The scope and implementation of this
provision remains unclear.

-- 
James Love, Director, Knowledge Ecology International
http://www.keionline.org | mailto:james.love at keionline.org
Wk: +1.202.332.2671 | US Mobile +1.202.361.3040 | Geneva Mobile +41.76.413.6584