PERUVIAN PHARMACEUTICAL INDUSTRY IN FAVOR OF FTA

C O N F I D E N T I A L LIMA 002264 SIPDIS C O R R E C T E D C O P Y (DECL DATE) SENSITIVE SIPDIS DEPT FOR WHA/AND, EB/IPE SWILSON COMMERCE FOR 4331/MAC/WH/MCAMERON DOC FOR J. BOGER USTR FOR BHARMAN, MCARRILLO E.O. 12958: DECL: 06/06/2016 TAGS: ECON ETRD KIPR PE SUBJECT: PERUVIAN PHARMACEUTICAL INDUSTRY IN FAVOR OF FTA Classified By: Economic Officer Samantha Carl-Yoder for reasons 1.5 (b) and (d) ¶1. (SBU) Summary. In a surprising move, the Peruvian Pharmaceutical Association, ADIFAN, announced its support for the U.S.-Peruvian free trade agreement on May 9. During the FTA negotiations, ADIFAN had insisted that medicines should be excluded from the FTA discussions, as the FTA would limit the ability of Peruvian pharmaceutical producers to make generics while increasing the costs of medicines. Luis Caballero, ADIFANs new president, explained that the association reviewed the FTA and met with officials from the Ministries of Trade and Health to understand the agreement. Caballero, who argues that the agreement could have been better negotiated, acknowledged that the FTA in general would provide economic benefits to Peru. ALAFARPE, the National Association of Pharmaceuticals, while lauding ADIFANs change of heart, warned us that ADIFAN might prove to be difficult during the implementation of the FTA. End Summary. 180-Degree Position hange -------------- ¶2. (SBU) For the past two years, the Peruvian Pharmaceutical Association (ADIFAN) has clearly stated its anti-FTA position. Former ADIFAN president Manuel Izaga repeatedly asked GOP negotiators to exclude medicines from the free trade agreement. Arguing that the FTA will hurt Peruvians by causing a dramatic increase in medicine prices, ADIFAN helped lead the charge against the FTA, organizing demonstrations in Lima and elsewhere. Despite Embassy and GOP efforts to explain the benefits of the FTA, ADIFAN members remained adamantly anti-free trade. ¶3. (SBU) On May 9, Luis Caballero, the new president of ADIFAN (the Peruvian Pharmaceutical Association),stated to the press that ADIFAN now considered the FTA to be beneficial to Peru. He indicated that Izaga, the previous president, agrees with this position. Caballero noted how the FTA would allow for a greater number of medicines to be sold on the Peruvian market due to increased patent protections. He cautioned, however, that the data protections under the FTA would delay the availability of new generic medicines for the general population. But Why the Change of Heart? -------------- ¶4. (SBU) We have tried for the past several weeks to secure a meeting with Caballero to talk about ADIFAN's FTA position; Caballero has indicated that he does not want to talk to the Embassy, nor has he made any additional statements on ADIFAN's position. We did speak to Manuel Izaga about his thoughts. He agreed with the general principal that the FTA would create increased economic opportunities in Peru, but noted his concerns over the high costs of medicines. Izaga indicated that several of ADIFAN's larger members saw the FTA as an opportunity to do business with American pharmaceutical companies and thus tacitly supported the FTA. ADIFAN's position change might reflect the power that these larger companies have over the smaller ones, he indicated. (Note: During Congressman Sandy Levin's trip to Peru in February, several Peruvian pharmaceutical companies noted that while they have concerns about competition in the pharmaceutical industry, they on balance support the FTA in general, as it will improve Peru's investment climate and rule of law. End Note.) ¶5. (C) ALAFARPE (a pharmaceutical research and development association made up of primarily foreign companies) officials were at a loss to explain why ADIFAN changed its position, although they noted that it bodes well for the passing of the agreement through the Peruvian Congress. Alan Angell Bessomes (please protect),Legal Advisor of Pfizer, indicated that not all ADIFAN members agreed with the previous position. ADIFAN, he noted, is changing its strategy because several of the larger companies, including InkaFarma, are interested in establishing joint ventures with American companies once the FTA is implemented. ¶6. (C) ALAFARPE officials highlighted that while ADIFAN currently supports the FTA in general, ADIFAN still believes that the IPR chapter could have been better negotiated. They warned that ADIFAN may reiterate this point to the incoming Garcia Administration, which has previously mentioned that it wants to renegotiate several chapters of the FTA. Bessomes opined that ADIFAN may support the FTA now, but could reverse its position during implementation of the agreement if it appears to hurt the Peruvian pharmaceutical companies. Comment -------------- ¶7. (SBU) ADIFAN's public announcement supporting the FTA is an unexpected, but positive development. The Minister of Health, who was also notoriously against many of the IPR protections in the FTA, has fallen in line with the Administrations views on the agreement and has established new regulations that will assist with the implementation of the FTA. These developments should help pave the way for the Peruvian Congress to ratify the agreement. STRUBLE