CHILE

Chile remains the last country in South America that has not passed Trade Related Intellectual Property Agreement (TRIPS)-compliant legislation – more than three years past the World Trade Organization WTO-imposed deadline. The copying situation in Chile is very troubling, with almost half of patented products having an average of three infringing copies registered by Chilean health authorities. However, it appears that the U.S.-Chile Free Trade Agreement will prospectively institute strong intellectual property protections going forward.

PhRMA requests that Chile be included in the 2003 “Special 301” Watch List, and that the U.S. Government urge Chile to cancel existing copy registrations and adopt a strong intellectual property law.

Intellectual Property Protection

We welcome the significant improvements that will flow from the U.S.-Chile Free Trade Agreement’s intellectual property chapter. However, Chile currently falls short of its international obligations. Of the 30 patented pharmaceutical products currently on the market, 14 have been copied, leading to millions of dollars of lost sales for the innovator. Unable to rely on the Chilean Government’s honoring of its commitments, the patent holder must take costly and lengthy legal action to defend his/her patents, while the unauthorized copy garners market share that in practice can never be regained. Copy registrations accelerated during 2002. This clearly violates Article 39.3 of TRIPS, which obligates Chile to safeguard confidential data from unfair commercial use, and has the effect of appropriating PhRMA members’ property without due process or compensation. However, it is our understanding that Chilean authorities have undertaken to halt inappropriate copy registrations, and the terms of the U.S.-Chile Free Trade Agreement, if implemented, will eliminate this problem going forward. Chile should cancel existing copy registrations.

Chile’s current patent law, implemented in 1991, offers an inadequate patent term (15 years from approval) and no transition (i.e. pipeline) protection for pharmaceuticals. Draft legislation designed to bring Chile into compliance with TRIPS obligations has not yet been adopted, more than three years past the WTO-imposed January 1, 2000 deadline. Chile should take prompt steps to bring its legislation into conformity with its international legal obligations.

Although the draft legislation pending in Congress represents an improvement over the existing law, several aspects are problematic. The 1991 law contained no mention of parallel imports; the new law does, which we regard as a step backward. The language of Article 51, which discusses compulsory licenses, should be modified to avoid ambiguity about when such licenses might be issued. The research-based pharmaceutical industry also advocates greater linkage between health authorities and patent officials, particularly in a country like Chile, where copying is a serious problem. To that end, the new law should require so-called “second applicants” (i.e. applicants seeking to copy existing products) to demonstrate that the product for which they seek approval from health authorities is not the subject of a valid patent or a pending application. Amendments recently made to this legislation include allowing copiers to use confidential data during the period between its submission as part of the regulatory approval process and the date that innovative product is registered.

We welcome Chile’s acceptance of provisions in the U.S.-Chile FTA to implement and enforce provisions guarding against the unauthorized commercial use of company proprietary data, as per the principles outlined in TRIPS Article 39.3. As is described in several other country sections in this submission, allowing the registration of “generic” products that use, or incorporate by reference, the company proprietary data of the innovator is an unfair trade practice that severely if not completely undercuts intellectual property protection for pharmaceuticals. This past practice in Chile has caused significant commercial damage to PhRMA members and we look forward to having five years of meaningful data protection when the FTA is adopted.

Market Access Barriers

The Chilean health registration system (e.g. Sanitary Code/Decree 1876) sets a higher standard for innovative products than for copy products seeking registration in Chile. This process discriminates against the research-based pharmaceutical industry when introducing original products into Chile, whereas it allows the swift introduction of copies in the Chilean market.

Damage Estimate

PhRMA Members report that the above barriers have had significant commercial impact. However, it is difficult to estimate such impact with precision, and PhRMA does not yet have such an estimate.

(Click here for the PhRMA's full 301 submission.)