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.