AUSTRIA: SPECIAL 301 INPUT ON PHARMA SUBMISSION

UNCLAS VIENNA 000237

SIPDIS

SIPDIS, SENSITIVE BUT UNCLASSIFIED

FOR EEB/TPP/IPE - JBOGER
STATE PLEASE PASS TO USTR FOR JCHOE-GROVES
DOC FOR ITA/MAC/OIPR - CPETERS

E.O. 12958: N/A
TAGS: ECON ETRD KIPR AU
SUBJECT: AUSTRIA: SPECIAL 301 INPUT ON PHARMA SUBMISSION

REF: STATE 9475


1. (U) This message provides post's response to reftel request for
input to the annual Special 301 review. The Pharmaceutical Research
and Manufacturers of America Organization (PhRMA) has requested that
the USG place Austria, as well as several other EU member states and
Norway, on the Watch List because of market access and patent
protection infringements.


2. (U) The pharmaceutical industry has been pressing the GoA for
several years to improve its pricing and reimbursement process,
which industry believes is inadequate. In an attempt to address
industry concerns about a lack of transparency in the reimbursement
process, the GoA introduced a new reimbursement system in 2004 with
three "boxes" that indicate the status of approval and reimbursement
for new and innovative drugs. Industry maintains that drugs are
still not authorized entirely based on therapeutic values.
Moreover, in the view of industry, the delay between market
authorization and market access is very lengthy (397 days according
to a study, which is the third longest period in the EU).


3. (U) In July 2007, the European Commission (EC) began proceedings
against Austria for violating the EU-Transparency Directive
(89/105/EEC). The European Court of Justice had already ruled
against Austria on this matter in 2001. The EC maintains that
Austrian law does not stipulate "objective and verifiable" criteria
for the authorization process for innovative pharmaceuticals. The
GoA argues that new legislation will come into force in 2008 and
2009 that meets the transparency criteria.


4. (U) Producers of generics traditionally have a strong lobby in
Austria. Austria has seen an increasing number of patent
infringements by generics producers in recent years. Embassy has
received reports of at least four cases between 2003 and 2006, when
the Austrian health insurance authorities approved a generic before
the patent of the originator (in all cases UK companies) had
expired. In two cases, the originator went to court and won.
However, due to lengthy court proceedings, the companies had to
lower the price of the pharmaceutical significantly to compete with
the generic. Industry has demanded that the GoA establish a
"patent-check" mechanism in the registration and reimbursement
process.


5. (SBU) Embassy informed the Ministry of Economics (MoE) about the
USG's 2008 Special 301 review and shared the PhRMA submission with
them, per instructions from USTR. Our MoE contact claimed that
industry's arguments have already been refuted. The contact said
that the GoA will submit a comment on this issue to the Special 301
Committee by February 29.


6. (SBU) Comment: U.S. innovative pharmaceutical companies in
Austria would welcome the inclusion of Austria on the Special 301
Watch List. Embassy shares industry's concerns, particularly on the
patent protection issue, but also on the issue of non-transparency.
However, we are unable to provide a definite recommendation as to
whether or not these shortfalls merit Austria's inclusion in the
Special 301 Watch List, given the alleged legislative relief. We
strongly recommend treating all EU countries in a consistent way, as
most of PhRMA's complaints against EU member states appear to focus
on similar IP infringement and market access issues.

YAP#