Submission of PhRMA for the "Special 301" Report on Intellectual Property Barriers — September 15, 2002

Priority Foreign Countries

Argentina

Argentina remains the worst violator of intellectual property for our industry in the Western Hemisphere, and one of the worst in the world. Although some small improvements have taken place since the U.S. launched its WTO case in May 2000, the situation remains extremely difficult for our industry. While we would welcome a satisfactory, enforceable settlement, Argentina�s long record of failure to respect international intellectual property norms makes this prospect most unlikely. We recognize that the current turmoil in Argentina poses policy challenges. However, the underlying intellectual property situation has not changed; nor have Argentina�s obligations as a WTO member. Thus, PhRMA requests that U.S. Trade Representative designate Argentina as a Priority Foreign Country (PFC) through the 2002 �Special 301� review process and seek a dispute settlement panel at the earliest appropriate opportunity, in the absence of any marked improvement.

Intellectual Property Rights

Argentina intentionally permits the local industry to copy innovative pharmaceutical products immediately, without permission of the innovator and without having to expend resources for research and development to prove safety and efficacy. The government actively facilitates local company appropriation of the core of PhRMA member competitiveness in both the Argentine and the extended regional market. In addition, Argentina has signaled its intent to dilute existing commitments, create onerous compulsory licensing requirements (including for local working), and to unfairly encumber the grant of exclusive marketing rights.

Argentina�s 1996 patent law came into force in October 2000. Because of its numerous deficiencies, ambiguities and contradictions, the law does not adequately protect intellectual property, is not compliant with TRIPS, and is the basis of a U.S. WTO case against Argentina. Although the industrial property office (INPI) began issuing pharmaceutical patents � for the first time in Argentine history � on October 24, 2000, few of the 160 patents issued thus far have been for commercially significant products. Moreover, due to the lack of protection for medicines in development (pipeline) and other severe deficiencies, effective pharmaceutical product protection is still an elusive goal.

The law fails to comply with TRIPS in several areas:

• It does not provide patent protection for products made using patented processes.
• It does not implement the transitional measures properly, e.g., it does not extend the term of existing patents and does not permit the conversion of process patent applications in some instances.
• It does not provide patent protection for certain biotechnological inventions.
• It does not implement required safeguards on compulsory licensing included in TRIPS Article 31.
• It does not provide for preliminary injunctive relief and/or reversal of burden of proof during trials for patent infringement.

• Under Argentine law, an applicant whose application for a process patent was pending on January 1, 2000, is not permitted to amend the application to include product claims. This denies effective product patent protection in Argentina for products that are patentable under the TRIPS Agreement.
• Further, the absence of exclusive rights in products made by patented processes, a loophole closed by the TRIPS Agreement, allows competitors to avoid liability for infringement of patented processes.
• The growing number of products across therapeutic classes that rely on biotech inventions remain unprotected under Argentine law.
• The overly broad definition of anti-competitive practices allows for the issuance of a compulsory license when, for example, the manufacturer prices its product above market prices for legitimate commercial reasons, or when it rationalizes its operations in a way that results in a slowing of marketing of production activities. This is a clear violation of TRIPS Article 31.
• The granting of compulsory licenses to produce products for export markets violates TRIPS requirements that compulsory licenses be limited to allow use predominantly for the supply of the domestic market. The Argentine system allows compulsory licensees to export patented inventions when the license was granted due to a national emergency in Argentina.
• Argentine law dramatically and unjustifiably magnifies the scope of a compulsory license by automatically granting compulsory licenses for patents on any technology that is necessary to work the patent that was the subject of a compulsory license.
• The failure to provide preliminary injunctions in patent cases allows competitors to continue to infringe a patent until the litigation is concluded, which irrevocably erodes the market share and the reputation of the patent owner. The TRIPS Agreement requires that judicial authorities be given the authority to halt this type of unauthorized exploitation during the litigation.
• TRIPS requires that the defendant bear the burden of proof in an infringement action, even if the product was new prior to January 1, 2000. However, Argentina has reversed this, forcing to bear the impossible burden of proving that a product identical to that which results from a patented process was made by the defendant using an infringing process.

Damage Estimate

The pharmaceutical market in Argentina is currently estimated at $3.4 billion (manufacturers� price). Given the absence of effective intellectual property protection, local firms dominate the market (nearly 50% share). Please see Appendix B for a study conducted in 2001 by Charles River Associates (CRA) which conservatively estimates $260 million in annual losses due to absence of data exclusivity alone. Please see Appendix C for a broader CRA study which estimates total losses in Argentina conservatively more than $750 million dollars a year.

Return to "Special 301" Report on Intellectual Property Barriers