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 -------------- -------------- ¶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 HONG KONG 00001743 002 OF 002 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