GOE REVIEWS INITIAL COMPULSORY LICENSE PETITIONS

C O N F I D E N T I A L QUITO 000075

SIPDIS
NOFORN

E.O. 12958: DECL: 2020/02/10
TAGS: ETRD KIPR EINV EC
SUBJECT: GOE REVIEWS INITIAL COMPULSORY LICENSE PETITIONS

REF: 09 QUITO 998; 09 QUITO 1068

CLASSIFIED BY: Heather Hodges, Ambassador, State, Exec; REASON:
1.4(B),(D)


1. (C) Summary. Ecuador's Intellectual Property Institute
(IEPI) has received two compulsory license petitions under
procedures issued on January 15. The procedures provide the
detailed follow-up to Presidential Decree 118, issued in October
2009 (refs A and B),which established access to medicines as a
"public interest" and provided a policy framework for compulsory
licensing of pharmaceutical products. The petitions were submitted
by two companies for the public non-commercial use of Abbott's HIV
treatment drug Kaletra. Only one of Kaletra's two components is
under patent in Ecuador. Once all documentary requirements are
met, IEPI will consult with the Ministry of Health before making a
final determination. The GoE has taken pains to draft the
compulsory license resolution in a manner it believes will make it
difficult to challenge in the WTO. The local Abbott representative
expressed doubts that local or foreign manufacturers could
effectively copy Kaletra because of the technological complexity of
producing the "combination drug." Nonetheless, issuance of a
compulsory license would likely reduce the willingness of
international research and development pharmaceutical companies to
introduce new products in the Ecuadorian market. End Summary.



IEPI Issues Compulsory License Resolution




2. (U) On January 15, Ecuador's Intellectual Property Institute
(IEPI) issued Resolution No. 10-04 P-IEPI providing specific
procedures for applying for compulsory licenses of patented
pharmaceutical products. (Note, IEPI is currently drafting a
resolution to cover compulsory licenses of agrochemicals). The
resolution has been forwarded to the Department for translation.
According to the resolution, interested parties may apply for
compulsory licenses within two categories: public non-commercial
use, and commercial use.




3. (SBU) The IEPI resolution stipulates that petitions for
"public non-commercial use" compulsory licenses must state that
production or importation of the licensed product will be used
primarily to supply the domestic market and be used for public
non-commercial use. For the purpose of the resolution, public
non-commercial use refers to "the processes of acquiring
pharmaceuticals by Ecuadorian public sector entities to cover
(supply) their respective health programs." In essence, if the
license will be used to produce or import pharmaceuticals for sale
to the government, it will be considered for public non-commercial
use, even if the licensee makes a profit in the transaction. The
petition also must include a proposal for pricing the product.
Note, under WTO Trade Related Intellectual Property Rights
Agreement (TRIPs) rules, to be granted a compulsory license, the
party seeking the license must have made an effort to obtain
authorization from the patent right holder on reasonable commercial
terms and conditions, but could not within a reasonable period of
time successfully conclude those negotiations. This requirement
may be waived in cases of public non-commercial use.




4. (SBU) To petition for a commercial use compulsory license, the
potential licensee must state that the product to be produced will
be used primarily to supply the domestic market and prove that they
have attempted to obtain the authorization of the right holder on
reasonable commercial terms and conditions, but have not obtained a
favorable response within 45 days. This provision does not appear
to entitle the licensee to import the product under the compulsory
license. The petition must also include a pricing proposal.



Two Petitions for Compulsory Licenses, So Far...




5. (C) In a meeting February 3, IEPI president Andres Ycaza told

Emboffs that IEPI had received two compulsory license petitions.
The petitions were from two different companies, but for the same
product - Abbott's Kaletra (protease inhibitor for treatment of
HIV). Ycaza said IEPI had requested the companies submit
additional documentation before it would review the petitions.
Once/if all documentary requirements have been met, IEPI will
consult with the Ministry of Health for a determination on whether
the medicine in question "is used to treat illnesses that affect
the Ecuadorian population and that are public health priorities."
Should the Ministry of Health make a positive determination, IEPI
would then make a final decision on issuing the compulsory
licenses. Ycaza passed this information to Emboffs confidentially
- please protect accordingly.




6. (C) Embassy has alerted Abbott, but has asked that they not
give attribution to the Embassy when discussing with GoE officials.
Abbott no longer has production facilities in Ecuador; equipment
from the company's one production facility was sold in 2005 and the
land in 2008. According to Abbott's local representative, Ricardo
Lama, the company sells Kaletra in Ecuador under the name Aluvia,
and at a vastly reduced "differential rate" of about $90 per month
for treatment, versus a cost of around $600 per month in the United
States. The name was changed to try to limit smuggling of the
product into other markets where cost is higher. Lama said
"Kaletra," a combination drug, is not patented in Ecuador, but one
of its two components is. He said the production process for
Kaletra is technologically complex and would not be easy to copy by
local or foreign manufacturers. Abbott produces all Kaletra in a
single plant in Germany. So far, no country has issued a
compulsory license for Kaletra.




7. (C) In speculating about Abbott's response should a
compulsory license be issued, Lama said if Abbott receives
sufficient royalty payments, it would likely keep Aluvia in the
market, since doctors and patients prefer the brand product.
However, he doubted Abbott would introduce any new products into
the Ecuadorian market. He also noted that Abbott is very concerned
about the implications for other markets should Ecuador issue a
compulsory license.



Action Request




8. (C) The local association representing international R&D
pharmaceutical companies (Corporacion Industria Farmaceutica de
Investigation - IFI) was provided an opportunity by IEPI to review
and comment on the compulsory license resolution prior to
publication. IFI and some of its members have told Emboffs that
they believe the resolution is largely compliant with TRIPs,
although some would like to have the negotiation period extended to
six months, as currently provided for under domestic intellectual
property legislation. In another area, Ycaza indicated that IEPI
had consulted with IPR experts at the WTO regarding the definition
of "public non-commercial use" within the resolution. Post would
appreciate Washington analysis of whether or not this provision is
WTO compliant.



Comment




9. (C) It remains to be seen on what scale compulsory licenses
for pharmaceutical products will be sought and issued here. We
suspect that enthusiasm may wane once the challenges of producing
some of the newest, and most sought after, drugs becomes apparent.
Nonetheless, there is potential for real damage not just to the
patent holders, but to the health of Ecuadorians as well, due to
public administration of inferior copies of patented drugs, or lack
of access to new medicines should R&D pharmaceutical companies pull
back from introducing new drugs into this market for fear of
compulsory licensing.
HODGES