U.S.-Israel Tussle Over IP Rights Continues; New Free Trade Policy Is Limited

The generic pharmaceutical industry won a victory when the United States agreed to loosen intellectual property restrictions in its free trade agreements. But the policy does not apply to every trading partner and some countries continue to battle against terms they say will delay the marketing of low-cost drugs.

The acrimony generics companies feel about U.S. trade policy emerged at the annual meeting of the International Generic Pharmaceutical Alliance, held in Miami Beach Nov. 28 to Dec. 1. A panel on free trade agreements featured a case study of Israel's experience negotiating with the Office of the United States Trade Representative.

Tal Band, a lawyer with the Israeli firm S. Horowitz & Co., described the struggle the generic drug industry in Israel has had with the USTR and the Pharmaceutical Research and Manufacturers of America over the latter's efforts to push through provisions that increase IP protection for the pharmaceutical industry and delay the introduction of generic drugs into the Israeli and U.S. markets.

Speaking on behalf of the Manufacturers Association of Israel, Band said one of Israel's main points of dispute with the USTR has been over the agency's efforts to expand data exclusivity - the period after drug approval during which regulators cannot rely on clinical data in a brand name company's application in reviewing applications for generic versions of the drug. Israel has also objected to USTR efforts to prevent exportation of drugs during the exclusivity period, and to extend patent terms.

Israel Generic Drug Sales to U.S. Top $1 Billion

For PhRMA, Band said, "every day of exclusivity in the Israeli market means less competition in the United States and more profit" for its members. He noted that Israel is one of the largest production and export sites of generic drugs worldwide, with $1.15 billion in sales in the U.S. market in the first half of 2007.

Band said Israel did not enact legislation granting data exclusivity until 2004 and did so only after brand name companies stopped registering new molecules in Israel. Israel currently grants 5.5 years of exclusivity from the date of approval for use in a "recognized country" or five years from the date of registration in Israel, whichever is first. The USTR has pushed for a five-year grace period for companies to register drugs in Israel after receiving approval in the United States. That additional time could delay the entry of generics for 10 years, Band said.

The USTR is seeking provisions that go beyond the 1985 free trade agreement between Israel and the United States. And thus far, Israel has warded off these restrictions. But Band said in an interview with "The Pink Sheet" that the battle is not over.

"We are still struggling about it," he said. "We as an industry in Israel are being treated unfairly and we don't see any reason to accept it."

USTR Deal With Congress Modifies Some FTAs

Since 2002, USTR has negotiated free trade agreements that include pharmaceutical IP restrictions, such as data exclusivity and linking drug approval to certain requirements. Generic companies and consumer advocates say the provisions eliminate protections provided under the World Trade Organization's Trade-Related Aspects of Intellectual Property Agreement (TRIPS).

The USTR agreed to revise FTA terms, however, under a bipartisan trade agreement it inked with the leadership of the House Ways and Means and Senate Finance Committees in June (¹ (Also see "Latin American Trade Agreements Loosen Pharmaceutical IP Rules" - Pink Sheet, 2 Jul, 2007.), p. 9).

As a result of that compromise, FTAs with Peru, Panama and Colombia, which had been pending ratification, were revised to loosen the pharmaceutical IP requirements. The Peru agreement, for example, limits data exclusivity to five years and specifies that it applies only to new chemical entities. The House approved the U.S.-Peru FTA in November and the Senate cleared the agreement Dec. 4. Congress has yet to consider the agreements with Panama and Colombia.

It is uncertain, however, whether future FTAs will have similar provisions. At the IGPA meeting, Christopher Wilson, Deputy Assistant U.S. Trade Representative in USTR's Office of Intellectual Property and Innovation, indicated that the revisions in the FTAs for the three Latin American countries may not be included in agreements with more developed countries.

Wilson noted that the FTA with Korea, signed in June and pending Congressional approval, includes provisions that were removed from the three Latin American FTAs. Most notably, the Korean agreement links drug approval to certain requirements and includes a provision on patent term extension.

"There is a distinction with respect to the Korea agreement reflecting Korea's higher level of economic development," Wilson said. He added that members of Congress who negotiated the bipartisan deal with USTR held the view that countries at higher levels of development should be held to standards closer to the provisions included in previous FTAs.

Israel on USTR's "Priority Watch List"

Israel, meanwhile, is irate about its inclusion on the USTR's "Priority Watch List" of countries that provide inadequate intellectual property rights protection. It has won support from Congress in opposing this designation. In April, 22 members of the House sent a letter to USTR Ambassador Susan Schwab requesting that Israel be removed from the list. Three Senators sent a similar letter.

Band contended that the USTR's Special 301 Report, which includes the watch lists, is one of the tools USTR and PhRMA have used to push Israel to adopt trade policy favorable to the brand name industry.

In an effort to illuminate how USTR puts together the 301 reports, earlier this year Band's firm filed a Freedom of Information request with the agency for documents on its proceedings. Of approximately 150 documents, he said USTR released 50 and not one of them included any criteria or formula for inclusion in the watch lists. He noted that there were internal communications from PhRMA lobbyists and members and questioned whether USTR could claim it does not give more weight to PhRMA's submissions.

Wilson responded to criticisms that USTR is an agent for PhRMA during the question and answer session. "I absolutely won't deny that branded pharma is an important constituent of USTR," he stated. "Their members are in my office regularly on various issues. They are an important part of the economy and I'm not going to turn them away."

But, he added, "The door they are walking through is equally open to the generics industry."

Band was not alone in expressing frustration with USTR. During the Q&A session, one member of the audience commented that Israel had been the incubator for four blockbuster drugs in the past 15 years. "If you choke the generic industry in India and Israel you may take the stem feeding you," he stated.

Other Countries Face Similar Struggle

Another attendee, María Fabiana Jorge, questioned Wilson about the terms of the U.S.-Andean FTA, specifically its exclusion of the best mode requirement. Under U.S. law, an inventor must disclose the best mode for reproducing his invention in his patent application. When the Andean governments requested that the requirement be restored, the provision was altered to say the governments "may" require best mode, making it no longer a requirement.

Jorge, president of the consulting firm MFJ International LLC, provided technical advice to several Latin American governments during the FTA negotiations. In an interview with "The Pink Sheet," she said Israel is not the only country to face pressure from the USTR to adapt IP policies favorable to the innovative pharmaceutical industry.

She noted that the USTR sanctioned Argentina in 1997 for trying to implement flexibilities of the TRIPS agreement and last year a USTR team went to Chile to conduct an out-of-cycle review and pressured the country to implement provisions for data exclusivity and linkage in Chilean law.

The bipartisan trade agreement setting a new framework for trade agreements represents a better balance between innovation and access, Jorge said. "This should be a turning point," she said. "It's not clear yet that it is for developed countries. It will depend on the leadership of the members of Congress and the administration. In the meantime though, CAFTA nations and Chile should request that the new trade policy be applied to their FTAs as well."

- Brenda Sandburg ([email protected])