CPTech Response to 2006 PhRMA “Special 301” Submission for Chile

March 2006

CPTech Response to 2006 PhRMA “Special 301” Submission for Chile

The “Special 301” Report is a report that the office of the U.S. Trade Representative (USTR) submits annually to the House Ways and Means Committee and the Senate Finance Committee on the adequacy and effectiveness of intellectual property rights protection around the world. The report identifies those countries that the USTR consider “deny adequate and effective protection for IPR or deny fair and equitable market access for U.S. persons that rely on intellectual property protection”.

Each year the USTR requests written submissions from the public concerning foreign countries, acts, policies, and practices that do not provide the adequate and effective intellectual property rights protection around the world. The U.S. industry associations and private sector representatives are very active in submitting annual recommendation.

The Pharmaceutical Research and Manufacturers of America (PhRMA), a United States pharmaceutical industry association, in its 2006 submission1 is requesting the United Stated Government to place Chile on the Priority Watch List of the “Special 301” procedure and therefore to threat the Chilean Government with unilateral trade sanctions. PhRMA claims that the Government of Chile has failed to “adequately” implement its obligations under the Chilean-U.S. Free Trade Agreement and the TRIPS Agreement on the protection of certain test data and linkage requirements.

This documents goal is to analyze the reality of such claims. But before analyzing the concrete claims, we note that both the TRIPS and the FTA agreements have detailed intellectual property provisions and dispute resolution mechanisms. There is an important issue regarding the appropriateness of unilateral mechanisms, such as the United States Special 301 process, to address issues regarding compliance with Chile’s TRIPS or FTA obligations. The United States is decidedly not relying upon the agreements’ official procedures to resolve controversies, where the foreign countries would have the opportunity to present a defense. There is also a question about the nature of the bargain. If the United States has signed an FTA, and that agreement permits Chile certain freedoms with respect to it’s domestic IP laws, as part of a larger trade agreement that has many other important features, is there not an expectation that Chile can benefit from the very flexibilities they have achieved in the negotiations? And if not, how will other countries view the benefits of negotiating similar agreements with the United States in the future?

PROTECTION OF PHARMACEUTICAL TEST DATA

Article 39.3 of the TRIPS Agreement requires WTO Members States to protect pharmaceutical test data they require the submission from unfair commercial use, but only undisclosed test data originated from new chemical entities and that required considerable effort to generate.

Influenced by their national brand-name pharmaceutical industry the United States is urging countries to implement the article 39.3 obligation through a system of exclusive rights on pharmaceutical test data. The US proposal goes considerably beyond the minimum obligations under the TRIPS. Modeled generally after a sui generis system of protection created in the United States in 1984, the US wants a system of exclusive rights to rely upon certain pharmaceutical test and clinical data that is required by and submitted to national drug regulatory authorities as part of their drug registration and marketing approval.

The United States has included provisions in every recent FTA agreement, including the U.S-Chile agreement, embracing the exclusive rights in data approach. In concrete, the Chilean-U.S. Free Trade Agreement contains the following language:

FTA Article 17.10.1 provides that “If a Party requires the submission of undisclosed information concerning the safety and efficacy of a pharmaceutical or agricultural chemical product which utilizes a new chemical entity, which product has not been previously approved, to grant a marketing approval or sanitary permit for such product, the Party shall not permit third parties not having the consent of the person providing the information to market a product based on this new chemical entity, on the basis of the approval granted to the party submitting such information. A Party shall maintain this prohibition for a period of at least five years from the date of approval for a pharmaceutical product and ten years from the date of approval for an agricultural chemical product.25 Each Party shall protect such information against disclosure except where necessary to protect the public.”

Footnote 25: “Where a Party, on the date of its implementation of the TRIPS Agreement, had in place a system for protecting pharmaceutical or agricultural chemical products not involving new chemical entities from unfair commercial use which conferred a period of protection shorter than that specified in paragraph 1, that Party may retain such system notwithstanding the obligations of paragraph 1.”

For Chile, while the best outcome of a FTA with the United States would have been the non-inclusion of a data exclusivity regime, the regime agreed to in the Chilean-U.S. FTA is positive to the extent that it restricts the protection to undisclosed data and to data which was required by the national authority. Therefore, if the national authority relies upon an approval granted in a foreign country, the obligation of protection should not apply. The restriction also only applies to a “product which utilizes a new chemical entity, which product has not been previously approved”. Following the footnote 25, only the United States with a pre-existent system that protects new uses/indications data for 3 years will have a system of protection for non new chemical entities.

The Chilean Data Exclusivity regulation2 is an important model because although it recognizes an exclusive right, it balances the system with several exceptions and requirements. In its last submission, PhRMA claims that in order to fulfill its TRIPS and FTA obligations, Chile should amend its national regulation to:

  1. Delete the exception to data protection when the owner of the test data “has incurred in conducts or practices declared contrary to free competition in direct relation to the utilization or exploitation of this information, according to a final decision of the Court of Defense of Free Competition”; and
  2. Delete the requirement to certify that test data provided is “undisclosed” because the United States interprets its as a formality not permitted under the TRIPS or the FTA; and
  3. Delete the exception to data protection when health authorities deem that the information submitted is “generally known or easily accessible”; and
  4. Delete the 4 grounds for revoking data protection: (1) “reasons of public health, national security, non-commercial public use, national emergency or other circumstances of extreme urgency declared by the competent authority….”, (2) “The pharmaceutical or chemical-agricultural product is subjected to a compulsory license, in conformity with that established in this law,” (3) “Failure to commercialize the product within twelve months from the date of grant of the sanitary registration,” and (4) “Protection in another country for longer than twelve months.”

Our analysis concludes that under the TRIPS Agreement, Chile does not have the obligation to amend its legislation in any of the described ways. Article 39.3 of the TRIPS agreement imposes a general obligation of protection and allows member states to decide the concrete terms of its implementation.

We agree that signing the Free Trade Agreement with the United States, Chile has acquired some TRIPS Plus obligations. However, we disagree with the interpretation given by PhRMA regarding the nature of such obligations. The exceptions, requirements and grounds for revoking data protection included in the Chilean implementing legislation are not prohibited by the text of the FTA. Furthermore, we read the FTA as permitting such implementation when the introduction to chapter 17 mentions the Doha Declaration on TRIPS and Public Health, and includes language in article 17.1.13 that plainly says “Nothing in this Chapter prevents a Party from adopting measures necessary to prevent anticompetitive practices that may result from the abuse of the intellectual property rights set forth in this Chapter.” Here we note that the United States, in exercising its rights to control anticompetitive practices, considers a wide range of restrictions on the exercise of exclusive rights, including compulsory licenses on patents, data and other intellectual property rights, both with and without remuneration, depending upon the nature of the abuse.

In conclusion, the Chilean regulation on data exclusivity is a useful model and efforts to amend it should be resisted.

LINKAGE

Patent-Registration Linkage is the practice of linking drug marketing approval to the patent status of the originator’s product and not allowing the grant of marketing approval to any third party prior to the expiration of the patent term unless by consent of the patent owner. This practice requires that "second applicants" for marketing approval demonstrate that the pharmaceutical product for which they are applying is not protected by a valid patent. Under this kind of regulation, national regulatory authorities have the obligation to prevent the registration and marketing of a generic pharmaceutical when a patent covers the product.

Under the TRIPS Agreement, there is no requirement for WTO Member States to recognize this practice. PhRMA does not dispute this in its submission.

The United States is including requirements to recognize the linkage practice in some of the Trade Agreements is has signed, including the one signed with Chile. In concrete, the Chilean-U.S. Free Trade Agreement contains the following language:

FTA Article 17.10.2(b) provides that “with respect to pharmaceutical products that are subject to a patent” each party shall “make available to the patent owner the identity of any third party requesting marketing approval effective during the term of the patent.”

FTA Article 17.10.2(c) provides that “with respect to pharmaceutical products that are subject to a patent” each party shall “not grant marketing approval to any third party prior to the expiration of the patent term, unless by consent or acquiescence of the patent owner.”

The relevant Chilean legislation is the Supreme Decree 1876 that does not contain any linkage requirement and was amended in 2004 to eliminate the requirement to cite patent information. In its last 301 submission, PhRMA claims that in order to fulfill its international obligations, Chile should amend the Supreme Decree 1876 or any other relevant legislation to:

  1. require Chilean officials to withhold all the sanitary registration of “third party” who request a registration for a product covered by patents owned by others; and
  2. require Chilean officials to either notify individual patent owners of requests to market a pharmaceutical product incorporating the patented invention; or to publish all requests to market pharmaceutical products as they are submitted.

We agree that signing the Free Trade Agreement with the United States, both the United States and Chile have acquired some TRIPS Plus obligations, to link the marketing approval of pharmaceutical products to its patent status. However, we disagree with the interpretation given by PhRMA on the nature of such obligations. If Chile implements the Free Trade Agreements in the way proposed by the PhRMA, Chile will have stricter regulations than exist in the United States.

For example on the first request: The United States regulation only withholds or stays the marketing approval of applications covered by certain types of patents (only the ones listed in FDA Form 35423) for a limited period of time (30 months or less) and under certain circumstances:

  1. the patent information is submitted before the date that the generic application is submitted to the FDA;
  2. the generic application includes a paragraph IV certification challenging a patent listed in the Orange Book; and
  3. the patent holder o originator brings an infringement suit within 45 days of the date that it receives notice of the paragraph IV certification.

For example on the second request: the United States only requires the generic applicants to notify patent owners of their application when they are challenging the validity or applicability of the patent. Furthermore, the U.S regulation includes a balanced co-obligation for the patent owners to list their patent information in the FDA Orange Book if they want to enforce their patents against generic applicants.

PhRMA notes none of these checks and balances in the suggested Chilean implementation regulation. If the Chilean Government decides to in introduce stronger forms of linkage in implement its FTA requirements, we recommend consideration of the following measures that will protect consumer interests:

  1. Estoppels from enforcing non-listed patents

    CPTech has recommended an implementation of the publishing of relevant patents that would focus on estoppels from enforcing non-listed patents.

  2. The marketing approval should only be withhold for a limited period of time

    The United States 30 month stay period should necessarily not be considered the best model. Canadian legislation only recognizes a 24-month stay period. A developing county might also consider even shorter periods, such as 6 or 12 months, particularly if the shorter time is sufficient for the patent owner seek enforcement of patents from the courts, the situation that faces patent owners in other fields of technology.

  3. The system should only recognize ONE stay/withhold period for drug and application.

    The U.S. regulation as amended in 2003 is of course the highly relevant example of the “one bite at the apple” approach.

  4. Under certain circumstances, the system should allow the marketing of a generic drug while a patent challenge is pending in court

    The U.S. regulation is a good example.

  5. The type of patent affects the linkage mechanism.

    If the patent is on the compound/composition, it is easier to determine if there is an infringement. However, if the patent is for a “process,” the regulatory authorities should not be put in the position of needing to make a determination. Linkage should not be applied for second use or dose patents. The U.S. FDA Form 3542 is a good starting tool.

CONCLUSION

As described, the Government of Chile has acquired some obligations when signing the Free Trade Agreement with the United States. Some of these obligations go further beyond what any member states is obliged under the WTO TRIPS Agreement and will harm and delay the generic industry entry into the Chilean market. The prices of the pharmaceutical drugs in Chile are going to be affected.

But our analysis reveals something worse: some of the obligations imposed by the FTA as interpreted by PhRMA go far beyond the United States pharmaceutical regulation. We urge the Governments of the United States and Chile not to accept the proposed PhRMA U.S. Plus pharmaceutical regulation.

MORE INFORMATION
Consumer Project on Technology
1621 Connecticut Ave, NW
Washington, DC 20009 USA
Tel.:  +1.202.332.2670 Fax: +1.202.332.2673
www.cptech.org

Judit Rius Sanjuan
Staff Attorney
judit.rius@cptech.org