U.S. DRUG COMPANIES COMPLAIN ABOUT IPR VIOLATIONS

C O N F I D E N T I A L SECTION 01 OF 02 HONG KONG 001743

SIPDIS

STATE FOR EAP/CM

E.O. 12958: DECL: 05/15/2019
TAGS: ECON EFIN EINV ETRD KIPR HK CH
SUBJECT: U.S. DRUG COMPANIES COMPLAIN ABOUT IPR VIOLATIONS
IN HONG KONG

REF: HONG KONG 1687

Classified By: A/CG Christopher Marut for reasons 1.4 (b) and (d)


1. (C) Summary: Executives of U.S. pharmaceutical companies
Pfizer and Merck remain critical of the Hong Kong
government's (HKG) generic drug approval process, arguing the
HKG should require generic drug manufacturers to certify that
their products do not violate patents held by a branded drug
producer. This "patent linkage" issue, however, is unlikely
to be addressed by a recently established, HKG-led drug
safety review committee. The U.S. branded drug manufacturers
also complain of weak penalties meted out to intellectual
property rights (IPR) infringers in community-based
pharmacies. A member of the HKG's pharmacy licensing board
is currently reexamining the board's decision to grant a
pharmacy ownership license to a repeatly convicted IPR
offender, as a result of Consulate inquiries. End Summary

Hong Kong Lags Behind PRC in Patent Linkage
--------------


2. (SBU) As part of the drug registration/approval process in
many countries (e.g. United States, China, Canada, Australia,
Singapore),generic drug manufacturers must declare that
their products do not infringe the patents of branded
pharmaceutical manufacturers. Hong Kong has no such "patent
linkage" regulation. Instead, the patent rights holder must
seek remedy through civil litigation after the HKG-approved
generic drug has been sold locally. The Hong Kong
Association of the Pharmaceutical Industry (HKAPI) and the
Hong Kong American Chamber of Commerce have for years lobbied
the HKG to adopt the pharmaceutical patent linkage approach
began in Mainland China in 2002. A generic drug manufacturer
must certify during China's product registration/approval
process that its drug does not infringe any third-party
patent.


3. (C) HKAPI Executive Director Sabrina Chan told Econoff on
August 21 that the HKG's lack of a patent linkage system for
pharmaceutical products may violate Article 28.1 of the
Trade-related Aspects of Intellectual Property Rights (TRIPS)
agreement, to which Hong Kong has acceded. Article 28.1
prevents third parties from making, using, offering for sale
or selling copies of patented products without the owners'
consent. Chan said, "In order to be fully TRIPS-compliant,
the HKG should formally integrate a patent check into its
generic drug registration process, as done in many developed
countries that have signed the TRIPS agreement." Food and
Health Bureau (FHB) Principal Assistant Secretary Shirley Lam
said her bureau is examining the issue, but she provided no
indication whether the FHB intends to incorporate patent
linkage into Hong Kong's generic drug approval process.
Department of Health (DOH) Chief Pharmacist Anthony Chan
considered it "unlikely" that the Review Committee would
address the issue. "The drug companies are free to pursue
legal action against an infringer in the civil courts," he
told Econoff on September 2.


4. (C) HKAPI President and Merck Managing Director Steven
Hardacre said the lack of patent linkage for drugs in Hong
Kong is analogous to the HKG's approach toward "shadow
companies" -- i.e. HKG-registered companies whose names
purposefully violate well-known trademarks. As part of its
corporate name registration/approval process, the HKG
performs no check to determine whether a new company's
requested name may violate an existing trademark. This
forces well-known multinational companies to take expensive
court action against HKG-registered companies bearing names
strikingly similar to the globally recognized (and
trademarked) names. Hardacre said the patent linkage and
shadow company issues illustrate "the government's
frustrating reluctance to add regulatory hurdles here and
there that would better protect IP rights holders."

Pharmacy Licensing Process Approves Convicted IPR Violator
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5. (C) In an August 26 meeting with Econoff, Pfizer
Corporation Hong Kong Legal Director Alex Cheung called for
stiffer penalties against pharmacy owners and pharmacists
convicted of selling counterfeit goods. He cited the DOH's
recent approval of an application to license a new pharmacy
-- New Wang Hing Dispensary. The pharmacy has the same owner
and operates at the same address as a pharmacy (Wang Hing
Medical Company) that was shut down by the DOH in 2008.
According to Cheung, Wang Hing's owner was convicted six
times from 2005-2008 for various offenses, including the sale
of counterfeit drugs, and he "paid only small fines." Cheung

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provided us with a letter sent from Pfizer's legal counsel to
the HKG's Director of Health P.Y. Lam, as well as the DOH's
response letter dated August 7, 2009.


6. (C) The letter to Lam described Pfizer's "disappointment"
over DOH approval of New Wang Hing's registration
application, requested revocation of New Wang Hing's
operating license, and urged an investigation into the DOH's
pharmacy licensing process. The DOH's response letter
reiterated its licensing approval for New Wang Hing and
stated the pharmacy "was found to have complied with the
legal requirements and met the policy criteria for
registration of premises of authorized sellers of
pharmaceuticals." Cheung called the DOH response
"unsatisfactory" and said the DOH letter "did not directly
address our concerns." (Note: Lam is also ex-officio chairman
of the Pharmacy and Poisons Board (PPB),the entity that
manages the pharmacy licensing process and approves
pharmaceutical products to be sold in Hong Kong. He also
serves as Vice Chairman of the Review Committee on Regulation
of Pharmaceutical Products (Review Committee),established in
March 2009 to examine Hong Kong's drug safety in the wake of
five deaths attributed to tainted locally manufactured
pharmaceuticals. Reftel contains more information about the
Review Committee and its objectives. End note.)


7. (C) With Pfizer's explicit consent, Econoff discussed the
case on September 2 with DOH's Chan, who is also an
ex-officio member of the Pharmacy and Poisons Board (PPB) and
member of the Review Committee. He said he was unaware of
the case, but promised to reexamine the PPB's licensing
approval for New Wang Hing. Econoff will remain in touch
with Chan and Cheung regarding the PPB's review.

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


8. (C) While the HKG seeks to ensure that Hong Kong remains
one of the world's least bureaucratic and most
business-friendly jurisdictions, ironically, these goals
occasionally trump efforts by IP rights holders to add key
regulatory hurdles to the registration, licensing and
approval processes governing companies, products and
individuals. As demonstrated by the patent linkage and
shadow company examples described above, HKG efforts to
facilitate business activity and innovation sometimes
inadvertently contribute to IPR infringing activities.
MARUT