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