UNCLAS SANTIAGO 001761

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: KIPR ECON ETRD PREL CI
SUBJECT: CHILE UNABLE TO EXPLAIN IPR REGIME TO USTR

REF: A. SANTIAGO 1562


B. SANTIAGO 1230

C. SANTIAGO 380


1. (SBU) Summary. Assistant USTR Eissenstat visited Santiago
August 10-11 as part of Chile's Out of Cycle Review under the
Special 301 Process. Eissenstat met with a panel from the
Ministries of Health and Foreign Affairs and patent office.
The GOC was unable to explain how its system provides IPR
protection for proprietary data and patents. It was adamant
it had made the legal and bureaucratic changes to comply with
the U.S.-Chile Free Trade Agreement. The GOC is worried IPR
enforcement will be costly and ultimately restrict consumer
access. USTR will continue OCR-related talks with the GOC
over the coming months but left Santiago more concerned about
Chile's IPR protection than before it arrived. End Summary.


2. (SBU) Assistant U.S. Trade Representative Everett
Eissenstat headed a delegation of USTR and Food and Drug
Administration officials to Santiago August 10-11 as part of
Chile's Out of Cycle Review (OCR) under the Special 301
Process. Chile is currently on the Watch List. The main
goals of Eissenstat's visit were to understand how and if,
two and a half years into the U.S.-Chile FTA, the GOC
provides data and patent protection for pharmaceuticals.


3. (SBU) GOC officials were defensive in the talks and
clearly concerned about the outcome of the OCR. The GOC was
eager for acknowledgement from Eissenstat that it has made
progress in establishing an effective IPR regime. The GOC
maintained a hard line that it was complying with the FTA,
while privately admitting there had been blatant patent
violations in recent years. The GOC maintained there would
at least be fewer violations in the future but was unable to
explain how it would accomplish even this.

Data Protection
--------------


4. (SBU) The GOC held out Decree 153, published in December
2005, as a major step forward in providing data protection
for innovative pharmaceuticals. It appears Decree 153 does
offer some basic data protection and at least two innovative
drugs have been granted data protection in the last six

months under its provisions. The decree does require that
the Instituto de Salud Publica (the ISP is the rough
equivalent of the FDA) not disclose protected data and not
rely on it for the approval of generics. That being said,
there are many technical barriers, which are not allowed
under the FTA, to receiving data protection.

No Linkage Exists
--------------


5. (SBU) Despite the FTA's language requiring both parties to
deny approval to pharmaceuticals that infringe on existing
patents, the GOC has not created any clear system to
accomplish this. There is a fundamental disconnect inside
the GOC between the approval actions of health officials at
the ISP and the Patent Office (Industrial Property Office).
At times with Eissenstat, the GOC played semantics by
insisting the ISP grants only sanitary approval and thus does
not grant the marketing approval listed in the FTA. When
pressed to delineate the marketing approval process and how
sanitary approval fits into the mix, GOC officials were
outright unable to do so. The final GOC response was that
the court system provided the linkage demanded by the FTA.
Seeking redress for patent violations through Chile's courts
is time consuming, usually fruitless and completely pointless
if the copy has already hit the market.

Conclusion
--------------


6. (SBU) The GOC's inability to explain its system only
elevated USTR's concern. While Chile may have made an effort
to provide some IPR protection, it is simply hard to tell at
this point what (if anything) it has created. The current
level of IPR protection for pharmaceuticals in Chile is
muddled at best and at worst simply an effort to keep the
U.S. at bay. Data protection is dictated by technical
barriers and is far from automatic. Patents are not
protected by the GOC and if there are violations, the courts
provide the only potential recourse. Essentially, the GOC
has taken its own responsibility to protect data and patents
as stipulated by the FTA and placed that burden on individual
companies. USTR will continue an OCR-related dialogue with
the GOC over the coming months but this visit raised more
questions than it answered. At this point, a USG
inter-agency decision based on the OCR is expected to be made
in October.

Comment
--------------


7. (SBU) It is President Bachelet herself who likely will
have to decide if Chile is going to comply with its FTA
obligations. The GOC has been resisting enforcing IPR,
because it is worried about the costs to its national health
care system (Plan Auge) and to the average consumer. The GOC
has reportedly commissioned a study, due for completion in
October, of the financial impact of fully respecting IPR. It
is hard to predict what conclusions that study will draw.
However, it seems clear that should estimates come in on the
high side, the GOC will likely continue to try to create the
illusion of IPR protection while doing little to fulfill its
FTA promises.
KELLY