SLOVENIA - 2008 SPECIAL 301 REVIEW -

UNCLAS LJUBLJANA 000081 SIPDIS DEPT FOR EUR/NCE TYEAGER, EB/TPP/IPE JBOGER STATE PLEASE PASS TO USTR JENNIFER CHOE GROVES, USDOC/ITA/MAC/OIPR CASSIE PETERS, FCS VIENNA FOR CQUINLIVAN SIPDIS SENSITIVE E.O. 12958: N/A TAGS: ECON ETRD KIPR SI SUBJECT: SLOVENIA - 2008 SPECIAL 301 REVIEW - RECOMMENDATION AGAINST INCLUSION ON WATCHLIST REF: STATE 09475 SUMMARY -------------- ¶1. (SBU) Slovenian legislation on intellectual property rights (IPR) and data protection is fully aligned with EU legislation, TRIPS, WIPO, and other ratified international treaties. In practice, U.S. pharmaceutical companies have access to the Slovene market. Recent efforts by the Government of Slovenia (GOS) to balance the health-care budget, curb inflation, and reduce government spending have posed some problems for "innovative" drug producers. But the GOS has been responsive to commercial concerns and it appears that the long-term impact of the health legislation will be to expand the availability of drugs, including innovative drugs, to the Slovene public. The Ministry of Health's (MOH) incorporation of the Pharmaceutical Research and Manufacturers of America (PhRMA) and Post's pricing concerns in the pricing regulation implemented in 2007 and the omission of the therapeutic reference pricing (TRP) from the Medicine Act submitted by the MOH in February 2008 are both positive signs. The MOH intends to implement the EU Transparency Directive, but has cited limited resources as the main reason for the delay. As well as working with PhRMA to address its concerns, over the last few years, Post has been cooperating with the GOS to provide training for judges, prosecutors, and staff at the Slovenian Intellectual Property Office (SIPO) to help address the challenges of the overburdened courts and strengthen U.S.-EU cooperation of IPR protection. Post believes GOS cooperation will continue to increase, and recommends that Slovenia not be included on the Special 301 Watch List. END SUMMARY. PHRMA CONCERNS -------------- ¶2. (U) ENFORCEMENT/COURT PROCEDURES: PhRMA's continued complaint about slow court procedures in Slovenia is well-founded but does not reflect the progress that Slovenia has made in the past few years. The Ministry of Justice's Lukenda Project, started in 2005 to eliminate the judicial backlog, has made inroads into the backlog by increasing the auxiliary court staff by 500, upgrading courtroom technology, and streamlining small claims cases. Slovenia has been steadily decreasing its court backlog every year. Since 2005, the backlog has decreased by more than 18 percent. While the GOS might be late in meeting its targets of eliminating judicial backlog by 2010, cutting the average processing time of a case from 18 months to 6 months, and implementing alternative dispute resolution mechanisms, it has made progress. SIPO acknowledges deficiencies in Slovenia's legal system, but denies that current legislation favors domestic (pharmaceutical or other) industry. In a meeting with emboff in May 2007, local PhRMA members concurred with SIPO's statement. ¶3. (U) To help support the efforts of the GOS, Post funded and coordinated several training programs for Slovene judges, prosecutors, and police in 2007. In 2008, Post plans to work cooperatively with the Slovenian Ministry of Justice and the State Prosecutor's Office to train judges, investigators, and prosecutors. Post believes that providing U.S. expertise will help to create a more efficient judicial system, improving the speed of case adjudication in the courts. ¶4. (U) FREE CHOICE OF EXPERTS: Although PhRMA asserts that experts are chosen to favor local companies, courts generally choose experts after consultation with both parties. It is also possible for the court to designate a person or institution which is not considered a "court expert," but an expert in the subject nonetheless, including a foreign person or institution. If one of the parties proposes an expert, the proposing party must cover the costs associated with the proposed expert. ¶5. (U) PIPELINE PROTECTION: While pipeline protection is not part of the GATT/TRIPS provisions, Slovenia is working towards harmonizing its procedures with the EU Patent Protection Law. Slovenia introduced patent protection on January 1, 1993. Prior to this, there was no protection either in Slovenia or the former Socialist Republic of Yugoslavia of which Slovenia was a part until June 25, 1991. Slovenia introduced the possibility of supplementary protection certificates in 1993. Since May 1, 2004, when Slovenia joined the EU, supplementary protection certificates have been granted in accordance with European regulations. Patent holders have the possibility to claim prolonged protection for a product after the expiration of patent protection. ¶6. (U) MARKET ACCESS BARRIERS: The GOS has been focused on controlling government spending, lowering inflation, and negotiating labor agreements. The MOH's goal, as part of healthcare reforms, was to control healthcare costs. In January 2007, the MOH adopted some changes to drug reimbursement procedures. Slovenia now employs a pricing and reimbursement system based on manufacturer prices for drugs in Germany, France, and Austria (previously it used Germany, France, and Italy as its reference points),taking into account Slovenia's lower GDP. While PhRMA acknowledges that regulating pricing at the manufacturer level increases transparency, it is still dissatisfied with the reimbursement procedure. Post understands that Slovenia's program, while perhaps not ideal, is a legitimate formula not unlike those used in other EU member states. ¶7. (U) PRICING: Slovenia's approach on drug pricing has been an effort to find a balance between the use of innovative and generic drugs. Contacts at the MOH have told Post that PhRMA's complaint that the government favors domestic producers over foreign was not justified and that the pricing measures were not specifically aimed at foreign producers. Post understands that domestic Slovene generic producers also are experiencing increased competition with the introduction of lower priced generic drugs from India. ¶8. (U) PhRMA complains that Slovenia is inconsistently and non-transparently applying the Anatomical Therapeutic Chemical (ATC) and Defined Daily Dose (DDD) systems. Post understands that the MOH uses the ATC/DDD as indicators, not exclusive determinants, of price. Contacts at the Ministry tell Post that there is no law or legal procedure prohibiting physicians from prescribing any drug approved for use in Slovenia. However, the system will only reimburse up to the value of the lowest-priced drug on the Interchangeable Drug List (IDL). This system would not affect any new, innovative drugs brought to market before the patent protection period ran out and generics became competitive. ¶9. (U) The MOH has told Post in the past that the changes in regulations have all been adopted in order to control healthcare costs and make decision-making more transparent. These decisions have significantly decreased the annual percentage rise in the Government's expenditures on healthcare. Post understands that the Ministry sees this current period as one of adjustment. Former Health Minister Andrej Brucan, as he unveiled the new pricing regulations in January 2007, stated that the MOH plans to use the increased savings to improve health services and to spend more on innovative drugs. INTELLECTUAL PROPERTY -------------- ¶10. (U) Slovenia has enacted highly advanced and comprehensive legislation for the protection of intellectual property that fully reflects the most recent intellectual developments in the TRIPS Agreement (Trade Related Aspects of Intellectual Property) and various EU directives. Slovenia is a full member of the TRIPS Council of the World Trade Organization (WTO) and the World Intellectual Property Organization (WIPO). Slovenia has ratified the WIPO Copyright Treaty (WCT),the WIPO Performances and Phonograms Treaty (WPPT),and the Cyber Crime Convention. ¶11. (U) Slovenia's Intellectual Protection Office actively participates in the Intellectual Property Working Party of the Council of the EU, the Trademark Committee and other EU working bodies in formulation of new EU legislation. The Copyright and Related Rights Act amended in 2001 and 2004 deals with all fields of modern copyright and related rights law, including traditional works and their authors, computer programs, audiovisual works, as well as rental and lending rights. The act also takes into account new technologies such as storage and electronic memory, original databases, satellite broadcasting, and cable re-transmission. The 2004 harmonization with the EU legislation introduced a new system of collective management of intellectual rights following the EU's latest directive. ¶12. (U) Slovenian legislation provides for different legal measures within the framework of civil, criminal and administrative law, which may be used by holders of intellectual property rights to defend their interests. The Industrial Property Act (IPA),the Act on Litigation Procedure (ALP),and the Act on Enforcement of Judgments in Civil Matters and Insurance (AEJCMI) are generally used in civil litigation and for cases involving infringement of industrial property rights. In 2007, SIPO revamped its website so that both domestic and foreign parties can access the most current information regarding intellectual property issues. DATA PROTECTION -------------- ¶13. (U) Slovenia has a comprehensive legal framework for the protection of intellectual property rights. Slovenia signed the WTO Uruguay Round Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) and has implemented those commitments. The number of intellectual property complaints has been quite low, although U.S. industry representatives have raised some concerns about the pace and scope of action taken by the government against infringement. ¶14. (U) The 1994 Law on Courts gives the District Court of Ljubljana exclusive subject matter jurisdiction over intellectual property disputes. The aim of the law is to ensure specialization of the judges and the speed of relevant proceedings. Concerning the TRIPS Agreement's enforcement provision, Slovene law provides for a number of civil legal sanctions, including injunctive relief and the removal of the infringement, the seizure and destruction of illegal copies and devices, the publication of the judgment in the media, compensatory and punitive damages, border (customs) measures, and the securing of evidence and other provisional measures without the prior notification and hearing of the other party. Furthermore, these infringements also constitute a misdemeanor with fines ranging from EUR 417 (USD 613) to EUR 41,729 (USD 61,000) for legal persons and a range of fines, from EUR 41.73 (USD 61) to EUR 2,086 (USD 3,066),for supervisors of individual offenders provided that the reported offenses are not criminal in nature. (Note. All USD amounts have been calculated at 0.680 Euro to the Dollar. End Note) In such a case, the Slovenian Criminal Code would apply, which may result in fines or, in extreme cases, imprisonment. COUNTERFEITING/PIRACY -------------- ¶15. (U) The GOS does not have significant issues regarding piracy of optical media (music CDs, video CDs, CD-ROMs, and DVDs); unauthorized procurement/use of computer software; counterfeit and pirated goods. Since the enactment of the Law on Copyright and Related Rights Act, there have been relatively few reported prosecutions for infringement violations. Most notable are cases of computer software piracy. In 2002, the Koper District Prosecution Office successfully completed a case against a small computer company, which had illegally installed software on its customers' hard disk drives in 1997. In January 2004, a long-running software piracy court case ended with a jail sentence and monetary fine. Since piracy prosecution is still in the early stages of implementation, Slovenia has dedicated resources to the training of prosecutors and public authorities. Prosecutors did not file any new cases in 2007. Slovenia continues to address the preservation of evidence in infringement procedures and border measures by amending existing legislation. Moreover, in 1997, the Ministry of Culture established the Intellectual Property Fund, the Slovene Copyright Agency, and the Anti-Piracy Association of Software Dealers (BSA) to combat the problem of piracy in a collective manner. ¶16. (U) The GOS takes its situation on the border of the EU's Schengen zone very seriously. Since joining the Schengen zone December 21, 2007, the GOS has strengthened its border security. The customs officials who once patrolled the Italian, Austrian, and Hungarian borders were reassigned to the Croatian borders. In 2007, the Slovenian police did not report counterfeit or pirated goods crossing any of Slovenia's borders. COMMENT -------------- ¶17. (U) Post recommends against including Slovenia in the Special 301 Watch List. In general, the GOS is meeting its obligations under TRIPS and the 24 other treaties on intellectual property and patents to which it is party. With membership in the EU, there is added pressure to conform to European norms, Post judges that Slovenia is making progress and will continue to do so in good faith, even if in some areas it has yet to achieve its goals. The most significant problem, by far, is an overburdened court system, which is also the target of many calls for reform from all sectors of society. Post's success in facilitating judicial training should also help Slovenia in its efforts to improve the efficiency of its courts. In addition to the IPR complaints, PhRMA has pointed to the problem of market access and drug cost reimbursement policies in the Slovene health system. There is agreement on all sides that the reimbursement mechanism employed by the Slovene health system has disadvantaged some innovative drug producers in some categories in the short run. This development, however, should be viewed in the context of the overall need for the GOS to balance its budget, bring down inflation, and root itself in the euro zone, which it joined in January 2007. Post believes that the GOS did not undertake these measures with a goal of favoring domestic producers of generic drugs - according to the GOS, Slovenia's system is similar to the majority of EU members' systems. ¶18. (SBU) Post hopes this information will be helpful in stimulating a well-informed discussion of PhRMA's claims. Post is committed to promoting a fair, open, and transparent market for U.S. pharmaceuticals. Post is in regular contact with the local PhRMA and has engaged successfully with the MOH on pricing issues and plans to continue to engage the GOS. In 2008, utilizing lessons learned when PhRMA and Post successfully engaged the GOS to ensure a fairer pricing plan, PhRMA and Post worked together to proactively to persuade the government not to submit the therapeutic drug pricing (TRP) legislation to the Slovene Parliament. Post plans to continue to promote fair market access and find the most effective ways in which PhRMA and Post can lobby the GOS. We look forward to engaging in further dialogue on this issue, and, as always, we welcome guidance from both USTR and the Department. END COMMENT. SHELTON