Background

September 13th, 1988

• The Generics Act (Republic of the Philippines. Congress of the Philippines. Republic Act No. 6675. 13 September 1988. Available at http://www.doh.gov.ph/ra/ra_6675.htm), which states that the generic name of a drug must be displayed prominently above the brand name on drug packaging, is approved in an effort to encourage the substitution of generics for brand-name drugs, thereby decreasing drug expenditures. The Act consolidates Senate Bill No. 453 (passed August 25th) and House Bill No. 10900 (passed August 31st).

April 1992

• The Philippines is listed on the Special 301 Priority Watch List by United States Trade Representative Carla Hills. The Philippines was listed on the Special 301 Watch List in 1989, 1990, and 1991, but not on the Priority Watch List.

April 6th, 1993

• The Philippines agrees to increase protection for intellectual property under its patent law as a condition for its removal from new United States Trade Representative Michael Kantor's Special 301 Priority Watch List for the year 1993.

  See Republic of the Philippines. Department of Trade and Industry. Understanding between the Government of the Republic of the Philippines and the Government of the United States of America Regarding the Protection and Enforcement of Intellectual Property Rights. 6 April 1993.

Available at http://www.cptech.org/ip/health/c/agreements/phil-1993-ip.html.

The Philippines remains on the Special 301 watch list for 1994.

April 29th, 1995

• United States Trade Representative Michael Kantor announces his Special 301 watch list. The Philippines remains on the list (though not on the priority list) and is asked by the US to tighten its patent laws.

  (US Department of State. Memorandum for the Under Secretary: Meeting with John D. Negroponte, U.S. Ambassador to the Philippines. 27 June 1995.)

June 27th, 1995

• Undersecretary of State Jeffrey E. Garten meets with John D. Negroponte, the US Ambassador to the Philippines. Garten's memorandum for the meeting, written by Charles Meissner, the Assistant Secretary of Commerce for International Economic Policy, states that "we will be monitoring the progress of patent, trademark and copyright legislation in the Philippine Congress to ensure this legislation meets the terms of the bilateral agreement and TRIPS. We also seek strong enforcement of patent, copyright, and trademark laws."

September 4th, 1996

• The Philippine Congress approves Republic Act No. 8203, the Special Law on Counterfeit Drugs. The new law prohibits the sale and distribution of counterfeit drugs. The definition given for "counterfeit drug" under the law is much broader than the WHO definition of a counterfeit drug as "one which is deliberately and fraudulently mislabeled with respect to identity and/or source." The RA 8203 definition of counterfeit drug includes any "unregistered imported drug product, except drugs brought into the country for personal use as confirmed and justified by accompanying medical records." (Congress of the Philippines, Republic Act No. 8203, available at http://www.doh.gov.ph/ra/ra_8203.htm) This will later become a legal obstacle to efforts to import less expensive drugs.

• The Pharmaceutical and Healthcare Association of the Philippines ( PHAP), an association of local subsidiaries of multi-national drug companies, joins the Bureau of Food and Drugs (BFAD) to "jointly conduct public information dissemination campaigns" to hospital and drug store pharmacists, drug store owners, and local retailers about the new law. (PhRMA, PhRMA Background on the Research-Based Pharmaceutical Industry in the Philippines, available at http://www.phrma.org/international/resources/27.08.2002.259.cfm)

December, 1996

• The USTR holds a Special 301 "Out-of-Cycle" Review on the Philippines. A December 1996 State Department cable from US Secretary of State Warren Christopher to the American Embassy in Manila notes, "Washington agencies remain concerned about the GOP's lack of progress in passing comprehensive IPR legislation despite a long standing government commitment to revise its intellectual property regime." (US Secretary of State. Cable to the American Embassy in Manila. December 1996)

June 6th, 1997

• The Philippine Congress approves Republic Act No. 8293, the Intellectual Property Code.

  Significant changes made under the law include the following:

  • The law establishes the Intellectual Property Office (IPO) to replace the Bureau of Patents, Trademarks and Technology Transfer. The IPO is assigned the role of approving patents and marks and settling disputes.
  • Penalties for the repetition of patent infringement change. Whereas the old law called for a fine of PhP 10,000 and/or five years of imprisonment, the new law prescribes a payment of PhP 100,000 - PhP 300,000 and/or six months to three years of imprisonment.
  • Whereas under RA 165, the importation of a product was not considered to constitute the "working" of that product in the Philippines, Chapter VIII, Section 69(d) of the new code states, "importation of the patented article shall constitute working or using the patent."

  (See The Chan Robles Group, Chan Robles Virtual Law Library, Intellectual Property Brief. ChanRobles Publishing Company, Manila: 1998-2004 at http://www.chanrobles.com/legal7code.htm.)

• A State Department Cable from the American Embassy in Manila to US Secretary of State Madeline Albright notes, "The pharmaceutical industry is ecstatic, placing the new legislation among the better codes in the world." (American Embassy, Manila. Cable to the US Secretary of State, Washington DC, June 1997)

September 1997

• The USAID-funded Intellectual Property Foundation holds a workshop the weekend of September 12th to discuss the implementation of rules and regulations of the new intellectual property law.

• A State Department cable comments that Intellectual Property Foundation chair Ignacio Sapalo "is interested in further USG comments on the law itself, as well as US views on the draft rules.

January 1st, 1998

• Republic Act No. 8293 (available at http://www.chanrobles.com/legal7ipo.htm), the Intellectual Property Code, goes into effect.

  See The Chan Robles Group, Chan Robles Virtual Law Library, Intellectual Property Brief. ChanRobles Publishing Company, Manila: 1998-2004 at http://www.chanrobles.com/legal7code.htm.

Events of 1999

Some time in late 1998 or early 1999, the Philippine Secretary of Health, Alberto Romualdez, was considering a proposal to change the process for drug registration. The purpose of the change was to require prescription drugs that are off-patent be sold using the generic name of the product. This change was designed to educate consumers about the generic name and to expand the use of the less expensive generic alternatives.

February 1st, 1999

• Officials from the Pharmaceutical and Healthcare Association of the Philippines ( PHAP) meet with Department of Trade and Industry Secretary Jose Pardo to discuss Romualdez's proposal.

  A February 1999 Cable from US Ambassador to the Philippines Thomas Hubbard to Secretary of State Madeline Albright reads:

  PHAP officials raised the issue with DTI Secretary Jose Pardo on February 1. [CENSORED] said Pardo "assured (PHAP) that he would help and that the proposal would not go forward." [CENSORED] says he understands Pardo subsequently spoke with Secretary Romualdez about the issue, and that Romualdez and Pardo agreed to Discuss the matter further. [CENSORED] says he also understands that Romualdez and Foreign Secretary Siazon also discussed the issue, but [CENSORED] commented that he does not know Siazon's position on the issue.

  The US State Department cable concludes, "We will follow developments on this issue closely. The Ambassador plans to express our concern over the proposal to Secretary Pardo next week. We hope that Secretary Pardo's engagement will help shunt Romualdez's proposal aside."

  See American Embassy, Manila, "Philippines - Health Secretary Advances Proposal to Ban Use of Brand-Names on Pharmaceuticals," Cable 2526 to the US Secretary of State, February 1999.

February 3rd, 1999

• In the spirit of the Generics Act, Alberto Romualdez, the Philippine Secretary of Health, suggests several changes to the drug registration process to be made by an administrative order (AO). These changes include a requirement that all pharmaceutical products be marketed as unbranded products, with the exception of "innovator pharmaceutical products and OTC products."

  (US Department of State. Philippines: Proposed Changes to Drug Registration. Undated Memo. 1999.)

February 4th, 1999

• An official from the Philippine Intellectual Property Office (IPO) tells the US Embassy in Manila that she has spoken with the DOH about the need to coordinate policy between the agencies. She also says she has spoken with PHAP.

  See American Embassy, Manila, "Philippines - Health Secretary Advances Proposal to Ban Use of Brand-Names on Pharmaceuticals," Cable 2526 to the US Secretary of State, February 1999.

February 16th, 1999

• The Pharmaceutical Research and Manufacturers of America (PhRMA), an association representing the largest American manufacturers of pharmaceuticals, submits its recommendation that the Philippines be listed as a Watch Country on the Special 301 Report. It argues that the proposed administrative order violates TRIPS Article 20, which states, "The use of a trademark in the course of trade shall not be unjustly encumbered by special requirements, such as use with another trademark, use in a special form or use in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings."

  However, a relevant TRIPs provision PhRMA declines to mention in its USTR letter is Article 17: "Members may provide limited exceptions to the rights conferred by a trademark, such as fair use of descriptive terms, provided that such exceptions take account of the legitimate interests of the owner of the trademark and of third parties."

  PhRMA also argues in its recommendation that the proposal violates the Philippine Constitution's due process clause, which reads, "no person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws." (Constitution of the Republic of the Philippines. 1987. Art.III Sec.1) PhRMA claims, "the property envisioned here includes all kinds of property, including trademarks."

  (Submission of the Pharmaceutical Research and Manufacturers of America for the "Special 301 Report" on Intellectual Property Barriers 16 February 1999)

February 25th, 1999

• The Department of Health releases a new draft of its proposed administrative order. The order makes the following provisions:

  1. DEFINITTION OF TERMS

  For purposes of this Order, the following definitions are adopted:

  • GENERIC PRODUCT - also termed "established drug", "Me-Too drug" or "Multisource pharmaceutical product"; shall mean: 1) drug which is marketed either under a non-proprietary approved name (INN name) or under another brand name (Proprietary name); 2) pharmaceutical product usually intended to be interchangeable with the innovator product; 3) usually manufactured without requiring a license from the innovator company; and 4) not covered by patent.
  • INNOVATOR PHARMACEUTICAL PRODUCT - means the drug product which was first authorized by BFAD for marketing in the Philippines (normally as a patented drug) on the basis of documentation of efficacy, safety and quality.
  • INNOVATOR PHARMACEUTICAL COMPANY - means the company or establishment which was first authorized to market the drug product in the Philippines.
  • PRESCRIPTION or ETHICAL DRUGS are pharmaceutical products or drug preparations that are to be dispensed only upon written order of a duly-licensed physician, dentist, or veterinarian, for the treatment of a condition or a diagnosed disease.

  2. Initial and Renewal of Registration of a Pharmaceutical Product.

  • 2.1 Innovator Pharmaceutical Products of the Innovator Pharmaceutical Company

    Application for initial or renewal of registration of innovator pharmaceutical products shall be accepted and processed for the following categories:

    • 2.1.1 Unbranded innovator products of the innovator company
    • 2.1.2 Branded innovator products of the innovator company

    Branded innovator pharmaceutical products of the innovator company shall be allowed to use their brand names up to the expiration of patent. The extension of use of brand name beyond expiration of patent shall be subject to the feasibility of establishing a local manufacturing facility for the said product.

  • 2.2 Prescription or Ethical Products (Rx)

    Application for initial registration of prescription drug products shall be accepted and processed for the following categories:

    • 2.2.1 Unbranded generic products
    • 2.2.2 Unbranded innovator products of the innovator company
    • 2.2.3 Branded innovator products of the innovator company

      Branded innovator products of under this classification shall be allowed to use their brand names up to the expiration of patent subject to the condition stated in section 2.1.2 above.

  • 2.3 Pharmaceutical Products Other Than the Innovator Products
    • 2.3.1 All renewals of branded generic products launched more than five (5) years ago shall be accepted and processed as branded generic products but the company shall be given only until December 31, 2000 to market unbranded products.
    • 2.3.2 All ethical pharmaceutical products launched within the last five (5) years can use brand names to a maximum of seven (7) years from initial date of registration in the Philippines.
    • 2.3.3 Ethical products launched after this Order takes effect shall not qualify under section 2.3.2, except if they are line extensions of ethical products under sections 2.3.2

  • 2.4 Effective January 1, 2001, all pharmaceutical products shall be marketed as unbranded products except for innovator pharmaceutical products, and ethical products under sections 2.3.2 and 2.3.3

    All companies holding a Certificate of Product Registration (CPR) for branded products, except innovator products, and ethical products under sections 2.3.2 and 2.3.3, whose validity is beyond December 31, 2000 shall market their product as unbranded generic product beginning January 1, 2001 and shall not be required to have their CPR amended to delete the brand name

• The State Department remains unsatisfied. An April cable from US Ambassador Thomas Hubbard to Secretary of State Madeline Albright notes,

  In late February the Department of Health circulated a revised version of its proposal to severely restrict the use of brand-names on pharmaceutical products. While somewhat less restrictive from an intellectual property standpoint, the revised draft Administrative Order (AO) would represent a major violation of trademark rights under the WTO agreement on trade-related intellectual property rights (TRIPS). Like the previous draft, the revised AO is unacceptable to the pharmaceutical industry.

Late February, 1999

• US Ambassador Thomas Hubbard sends a cable to US Secretary of State Madeline Albright discussing Secretary Romualdez's proposal, which under study in the executive branch.

  Ambassador Hubbard writes:

  Proposal Restricting Use of Brand Names

  As reported REFTEL (Cable 2526, Manila), Secretary of Health Alberto Romualdez has proposed severe restrictions on the registration of brand name products by the Bureau of Food and Drugs (BFAD). Under a draft administrative order, prepared by BFAD for Romualdez and dated February 3rd, BFAD would accept applications to register only the following pharmaceuticals: unbranded generic products, unbranded "innovator" products of the innovator company, and branded innovator products of the innovator company. Only OTC products and patented innovator products would be allowed to be marketed as branded products after December 31, 2000; all other pharmaceutical products would have to be marketed as unbranded generic products. The proposed AO would in effect prohibit firms from using their trademarks on most pharmaceuticals. Embassy will fax a copy of the draft AO to EAP / PIMBS and USTR.

  Pharmaceutical Industry Lobbying

  Both local and multinational pharmaceutical firms are continuing a low-key appeal to Secretary Romualdez to drop the proposal. _______________________________________ told us Romualdez seems committed to his approach, but seems willing to discuss the issues involved. As reported REFTEL (Cable 2526, Manila), the industry has also tried to enlist the support of Trade and Industry Secretary Jose Pardo. PHAP is keeping the International Federation of Pharmaceutical Manufacturers Association (IFPMA) informed. In a February 24 fax to __________, IFPMA's Director General said that the group's intellectual property committee has discussed the DOH proposal and regards it as a violation of the WTO agreement on Trade-Related Intellectual Property Rights (TRIPS). We noted to ________ that, while the proposal may be inconsistent with TRIPS, Philippine trademark obligations under TRIPS are only legally enforceable after January 1, 2000.

  What Romualdez Wants

  Romualdez has previous (illegible) healthcare costs for consumers. According to USAID, about fifty percent of healthcare spending is accounted for by personal expenditures. DOH believes the cost of pharmaceuticals is relatively high, compared to other developing countries in the region. The generic law, which required pharmaceuticals to be labeled with the generic name in bold typeface above the brand name, has, in DOH's view, not actually resulted in more widespread availability of generic drugs, reportedly because most drugstores prefer to sell the more remunerative branded pharmaceuticals. Romualdez may see the proposed AO as a means to address this problem.

  Romualdez has stated that his action is not intended to target multinational products, but the opposite: to reduce possible risks associated with certain branded pharmaceuticals imported from other developing countries. He may believe that the AO would eliminate most of those types of products from the market. Sources close to Romualdez told USAID that he is committed to adopt measures to expand the use of generics, but is open to further discussion of the proposed AO, and has requested DOH lawyers to review its provisions carefully.

  (See American Embassy, Manila, "Philippines - More on Proposal to Restrict Use of Brand Names on Pharmaceuticals," Cable 3272 to the US Secretary of State, February 1999.)

April 6th, 1999

Eloisa Lim, a Department of Trade and Industry official tells Embassy officials "she hopes the proposal 'will die a quiet death.'" She has recently been asked by Department of Trade and Industry Secretary Jose Pardo to "work with industry to come up with alternative measures that would address Secretary Romualdez's desire to ensure that generic drugs are more widely available" as Executive Assistant of the Economic Mobilization Group (EMG), a government-business consultative forum.

(See American Embassy, Manila, Cable to the US Secretary of State, Washington DC, 13 April 1999)

April 12th, 1999

• The Economic Office of the American Embassy in Manila meets with Philippine Bureau of Food and Drug (BFAD) Director William Torres.

  A cable from US Ambassador to the Philippines Thomas Hubbard to Secretary of State Madeline Albright states,

  Torres expressed disappointment that the pharmaceutical industry has not come forward with any proposals on "how to make branded products - and generics - less expensive." He asserted that both generic and branded pharmaceuticals are considerably more expensive in the Philippines that in other developing countries. He attributes this in part to the companies' pricing strategies and to high mark-ups by pharmacy retailers. Torres said he had hoped that, after circulation of the original draft AO, the industry would have come forward with proposals on how to make branded products - and generics - less expensive. But he alleged that industry has failed to present any alternatives.

  (See American Embassy, Manila, Cable to the US Secretary of State, Washington DC, 13 April 1999)

April 14th, 1999

• Paul Brown, First Secretary the Economic Section of the American Embassy in Manila e-mails Jean Kelly of the Department of Commerce, saying that the Generics Act "includes most of the provisions we have in the US in State law -- things like requiring that pharmacies fill prescriptions with generics unless the physician explicitly requires branded products. But the main thing that has promoted generics in the states -- HMOs -- barely exist here."

  (Brown, Paul A. E-mail to Jean Kelly. "RE: Pharmaceuticals" 14 April 1999)

April 15th, 1999

• The Joint Foreign Chambers issue a position paper expressing concern that the Department of Health proposal violates Philippine legal obligations. The paper is signed by the American, Australian, Canadian, European, Japanese and Korean Chambers of Commerce in the Philippines and the Philippine Association of Multinational Regional Headquarters.

April 30th, 1999

• United States Trade Representative (USTR) Charlene Barshefsky places the Philippines on the Special 301 Watch List for the seventh consecutive year, noting "The Philippines is also considering a proposal which would conflict with TRIPS trademark obligations by restricting the use of brand names on pharmaceutical products."

  (See US Executive Office of the President. Office of the US Trade Representative. Special 301 Annual Review on Intellectual Property. Available from the United States Embassy, Bogota at http://bogota.usembassy.gov/wwwse015.shtml ).

May 12th, 1999

• The US Embassy's Economic Counselor, Terry A. Breese meets with Philippine Secretary of Health Alberto Romualdez. A State Department cable from the American Embassy to Secretary of State Madeline Albright states that the Economic Counselor "explained that, if promulgated, the draft AO would generate pressure to retaliate against Philippine exports that enter the US under the Generalized System of Preferences." He repeated this warning later, saying that "restricting the use of brand names would be a major trade issue." Romualdez "replied that it was important for pharmaceutical companies to change their marketing habits."

  (American Embassy, Manila, Cable to the Secretary of State, Washington DC, May 1999)

• The same State Department cable states that Leo P. Wassmer, Executive Vice President of PHAP has told US officials "that he had spoken extensively to Secretary Romualdez in recent days, about working together to address the Secretary's interests."

  The cable continues, "Wassmer added that he has reached an agreement with senior DOH officials to establish a DOH-PHAP committee to explore other options to reduce the cost of pharmaceuticals in the Philippines. He noted that these other options were similar to those raised by the embassy in our discussions with DOH and the Bureau of Food and Drug."

May 28th, 1999

• The Philippine Senate Committee on Health holds a hearing on drug pricing. According to an 11 June cable from US Ambassador Thomas Hubbard to Secretary of State Madeline Albright, Dr. Kenneth Hartigan-Go, the Deputy Director of the Philippine Bureau of Food and Drug (BFAD), "showed a slide representation on a price comparison survey in the region, which asserted that prices of pharmaceuticals sold in the Philippines are higher than those in other Asian countries." PHAP's Executive Vice President, Leo P. Wassmer, "responded by pointing out that many factors influence pharmaceutical prices, such as the cost of raw materials, labor, taxes, duties, and the structure of the wholesale and retail markets." The Ambassador's cable notes,

  With the exception of Wassmer, all the other witnesses agreed with Romualdez and Go that a greater part of the mark-up in drugs manufactured by multinational pharmaceutical companies cover the cost of promoting the product. Health Committee Chairman, Dr. Juan Flavier, advised Wassmer to ask the multinational (sic) to look at their pricing structures and 'identify where the problem is.'

June 8th, 1999

• Paul Brown, First Secretary of the Economic Section of the American Embassy in Manila e-mails Sean Murphy of the Office of the United States Trade Representative, saying that the Ambassador's absence from the country

  limits our ability to approach Secretary Romualdez again (the first time didn't make much of an impression on him), but a front channel demarche request for the charge to approach Pardo and others might be useful if it takes the approach that the danger to GSP (through a possible petition from Pharma if the AO goes thru) should not be discounted.

June 10th, 1999

• The Economic Office of the American Embassy in Manila meets with Rodolfo Quimbo, Chief of Staff to Senate Health Committee Chairman Dr. Juan Flavier. Quimbo states that the Senator is interested in the examining the source of high pharmaceutical prices in the Philippines and that "one approach might be to limit the tax deductibility of promotional expenses." The Embassy representatives raise alternative approaches including "measures to reduce market access barrier to the importation of quality generic pharmaceuticals from the United States."

  (American Embassy, Manila, Cable to the US Secretary of State, Washington DC, 11 June 1999)

June 11th, 1999

• US Ambassador to the Philippines Thomas Hubbard sends a cable to Secretary of State Madeline Albright, noting "US Pharmaceutical Companies on the Board of the Pharmaceutical and Healthcare Association of the Philippines (PHAP) rejected a proposal floated by PHAP's chairman, Leo P. Wassmer, for a price cut on certain essential drugs. Wassmer had floated the idea of a price roll-back in conversations with Secretary Romualdez, and had indicated to the Secretary at the time that he thought the idea would be acceptable to PHAP's members, who are mainly multinational pharmaceutical subsidiaries. We understand Secretary Romualdez portrayed the price reduction proposal to his staff as a done deal, and now feels betrayed by the subsequent rejection of the proposal by the PHAP board."

• The same cable states that

  Meanwhile, the Board of Investments (BOI), an attached agency of the Department of Trade and Industry (DTI), has reiterated its opposition to the DOH proposal. A BOI position paper warns that the proposal could endanger Philippine benefits under the US GSP program, a point we have emphasized to BOI and other DTI officials, most recently with DTI Undersecretary Ernesto Ordonez on June 9th.

June 15th, 1999

• Representatives from the Economic Office of the American Embassy in Manila meet with Dr. Kenneth Hartigan-Go, Deputy Director of the Philippine Bureau of Food and Drug. Embassy officials report,

  Go, who is regarded as a protege of Romualdez, and who also oversees the Department of Health's National Drug Policy, told us that the Secretary believes very strongly in the proposal, 'but also has an open mind' on other approaches to 'reduce drug prices'. Go said the brand-name proposal will probably be subjected to several public hearings. Go characterized the problems the secretary wants to address as high pharmaceutical prices and the apparent lack of success of the Generics Act in promoting the use of generic pharmaceuticals.

  (American Embassy, Manila, Cable to the US Secretary of State, 18 June 1999)

June 18th, 1999

• Officials from the American Embassy and the Japanese Embassy in the Philippines meet to discuss the proposed administrative order. US officials report,

  Japanese Embassy First Secretary Hikaru Fukuda told us several Japanese pharmaceutical companies are concerned about the proposal. Fukuda agreed that Philippine physicians are very brand-conscious, and that any move to limit registration of brand-name pharmaceuticals would have a serious effect on the sales of multinational pharmaceutical companies. We explained that the embassy has expressed concern directly to DOH, BFAD, and DTI officials, and urged Japan to do the same."

  See American Embassy, Manila, Cable to the US Secretary of State, 18 June 1999.

July 2nd 1999

• US Secretary of State Madeline Albright sends an Action Request to the American Embassy in Manila, asking Embassy officials to present an attached demarche to Philippine government agencies including the Department of Trade and Industry, NEDA, the Department of Foreign Affairs, the Department of Health, and the Office of the President. The action request notes,

  Through this demarche, Washington agencies wish to alert Philippine officials to the seriousness with which the USG views the Health Department's proposal with regard to the limitations on the use of trademarks and the registration of pharmaceutical products. Although the USG has other significant concerns with regard to the protection of intellectual property in the Philippines, it is hoped that the expression of our views will help persuade Philippine officials that they must withdraw this proposed administrative order. This demarche is an interim step pending high-level USG letters to GOP officials. Upon confirmation of Post's delivery of this demarche, Washington officials will make similar presentations to trade officers with the Philippine Embassy in Washington.

• The demarche contains the following statements:

  The withdrawal of this proposal will help to reassure both local and foreign investors of the commitment of the Philippine government to intellectual property relations.

  This proposal has additional negative implications for the overall economy of the Philippines. Specifically, it would disadvantage U.S. and other pharmaceutical firms now operating in the Philippines to the extent that they may be forced to suspend or terminate their Philippine operations, reducing the access of Philippine consumers to innovative medicines which depend upon recognition of trademarks or brand-names for product identity.

  Implementation of the proposed restrictions on the use of trademarks in the Philippines may also increase domestic pressure in the United States to reassess the appropriate level for preferential access to the U.S. market for Philippine products. In 1998, $1.2 billion in exports from the Philippines entered the United States under the Generalized System of Preferences.

  The USG wants to work with DTI and DOH to promote a less trade-restrictive approach which advances your government's health policy objectives.

  The action request sent to the American Embassy in Manila is signed by Thomas R. Pickering, the US Undersecretary of State for Political Affairs. The same action request is sent again to the Embassy in Manila and also to the US Mission in Geneva; it is signed by US Secretary of State Madeline Albright.

  (See US Secretary of State. Action Request for American Embassy, Manila. 2 July 1999)

July 5th, 1999

• American Embassy officials deliver a demarche to Philippine officials, including cabinet officials, officials at the Bureau of Food and Drug, officials at the Department of Trade and Industry, and officials at the Department of Foreign Affairs. In response to the delivery of the demarche, BFAD's Director William Torres tells representatives of the Economic Office of the American Embassy in Manila that significant revisions have been made to the drafted administrative order. The US officials note:

  Torres said "there have been some major revisions" to the draft AO that would allow companies to register brand names for "me too" pharmaceuticals if the company registering the product also markets/produces (he wasn't clear which) generic versions of the product: "If they do 50% in the form of generics, then we will register the brand name." Torres asserted that "we had trade lawyers look at the revision and they believe there won't be a problem with TRIPs." He added: "They may have found a way around the TRIPs problems with previous versions of the AO. Lawyers tend to be good at that." He declined to share a copy of the latest draft, saying he can only release it once it is published for comment. Torres closed by saying the revisions "allow us to balance the health and IPR/trade interests."

  (American Embassy, Manila, Cable to the US Secretary of State, 9 July 1999)

July 7th, 1999

• Joseph Estrada, President of the Republic of the Philippines, hosts a dinner in honor of Eugene Martin, the departing US Deputy Chief of Mission to Manila.

  At the dinner, American Ambassador Thomas Hubbard and the American Embassy's Economic Counselor, Terry Breese, speak with Philippine officials about the proposed administrative order.

  Text from a cable from Ambassador Hubbard to US Secretary of State Madeline Albright follows.

  Ambassador and Economic Counselor took advantage of a July 7 dinner hosted by President Estrada in honor of departing DCM to raise U.S. concerns with Philippine cabinet officials. ECONCOUNS had earlier at the Embassy's July 4th reception told Health Secretary Romualdez that he had instructions to raise the issue. Romualdez was unavailable for an office meeting, but agreed to see ECONCOUNS on the margins of the President's dinner. Romualdez listened to ECONCOUNS, but explained that he is determined to publish the draft administrative order (A.O.) on July 13. This will open a three-week public comment period, after which DOH will prepare final regulations. ECONCOUNS provided Romualdez with a non-paper containing REF A talking points and reiterated strong US concern about the proposed measure.

  ECONCOUNS was also able to briefly discuss the issue with Trade and Industry Secretary Jose Pardo and provide him with a copy of the non-paper. ECONCOUNS discussed the issue at greater length with Senior Deputy Executive Secretary Cardenas, providing him with a copy of the non-paper. Cardenas was well-aware of the issue, but offered no indication of his views on the merits of the proposed legislation.

  The Ambassador was able to engage Romualdez, Pardo, Executive Secretary Zamora and Foreign Secretary Siazon in an extended discussion of the issue during the President's dinner. Romualdez reiterated his earlier statement that publication of the draft A.O. July 13 would only begin a comment period and that the regulations would not take effect without a further review and a decision on his part. When Zamora (a lawyer) asked about the WTO aspects of the regulation, Romualdez responded that the DOH attorneys believe the draft is consistent with Philippine WTO obligations.

  See American Embassy, Manila. Cable to the US Secretary of State, Washington DC. 9 July 1999

• The Economic Office of the American Embassy in Manila meets with Delfino Bondad, Special Assistant to Department of Trade and Industry Undersecretary Nelly Favis-Villafuerte. In a cable to US Secretary of State Madeline Albright, US Ambassador to the Philippines Thomas Hubbard reports,

  ECONOFF emphasized that the proposed DOH A.O. poses a potentially serious threat to Philippine GSP benefits. ECONOFF noted that executives from the U.S. pharmaceutical companies have told us that the industry in the U.S. will not hesitate to file a petition demanding revocation of Philippine GSP privileges if the measure is published.

  Bondad responded by noting his familiarity with "actions taken by the U.S. pharmaceutical industry against other countries for inadequate IPR protection."

  (American Embassy, Manila. Cable to the US Secretary of State, Washington DC. 9 July 1999)

July 9th, 1999

• American Ambassador Thomas Hubbard reports in a cable to US Secretary of State Madeline Albright that Embassy officials have expressed the possible foreign investment repercussions of the proposed administrative order to Corazon Halili, Chief of the Consumer Manufacturer's Division at the Philippine Bureau of Investment. Hubbard reports,

  Noting the recent decision by several U.S. pharmaceutical companies to close certain production facilities in the Philippines, ECONOFF emphasized that the proposed A.O. is a further disincentive for attracting investment in the pharmaceutical industry in the country. Halili said BOI has not taken a formal position on the issue, and prefers to 'wait until a draft A.O. is actually published' before formulating a response. ECONOFF suggested that, given the serious trade implications, it might be more constructive for BOI to weigh in with concerns immediately.

  (See American Embassy, Manila. Cable to the US Secretary of State, Washington DC. 9 July 1999)

• Delfino Bondad, Special Assistant to Undersecretary Nelly Favis-Villafuerte, tells US Embassy officials that "a memo summarizing the U.S. concerns had been passed to Secretary Pardo, and that Undersecretary Villafuerte had also briefly discussed the issue with Pardo."

  (See American Embassy, Manila. Cable to the US Secretary of State, Washington DC. 9 July 1999)

July 12th, 1999

• Philippine Department of Health Secretary Alberto Romualdez writes to Terry Breese, US Economic Counselor at the American Embassy in Manila. Romualdez states,

  The protection of intellectual property rights especially that of individuals who have taken undue advantage of such rights cannot take precedence over the higher good of protecting the lives of Filipino children and promoting the health of the Filipino people. This is consistent with the spirit of the recent World Health Assembly Resolution on "revised drug policy" that urges member states (of WHO) "to ensure, that in the formulation of pharmaceutical policies, public health concerns are considered paramount."

  He notes further, "imposing of strict restrictions on the marketing of pharmaceuticals will adversely affect only a small segment of industry that has for years behaved contrary to the interests of Filipinos, especially the poor."

  Secretary Romualdez continues:

  Suspension or termination of the operations of U.S.-based pharmaceuticals will cause only minor dislocations in the Philippine pharmaceutical industry, as most of these are available either through local manufacturers or from other countries. Innovative products that are truly life-saving will continue to be available thru international humanitarian agencies and other concerned organizations.

  Restrictions in the use of brands cannot possibly encourage fraudulent labeling. On the contrary, informing and educating the public on the equal efficacy, effectiveness, and quality of all competing generic products will do away with the need to copy other company's labels. In addition, it may actually be desirable to authorize the importation of products from reputable suppliers in other countries where the same are available at much cheaper costs.

  Brand name regulation by BFAD will affect only products that require doctor's prescriptions for their use. These comprise a small fraction of total American goods sold in the Philippines. It does not seem appropriate for the strongest economic power in the world to jeopardize the entire range of commerce with the Philippines. The disproportion is especially clear if one considers that what is at stake is the health and lives of Filipino children as against the already vast profits of a few companies.

  The Department of Health has a responsibility to examine all possible options that will assure quality health care for all Filipinos. If these options include limiting the property rights of a few, it is still mandatory to consider them in view of the well-established legal maxims favoring the benefit of the majority.

  It is hoped that the USG will help DTI and DOH to regulate the oligopolistic tendencies of some firms who are now facing legal actions for restrictive trade even in the U.S.

  See American Embassy, Manila, Cable to the US Secretary of State, Washington DC, 12 July 1999.

July 13th-16th 1999

• US Secretary of Commerce William Daley warns Philippine Department of Trade and Industry (DTI) Secretary Jose Pardo that Romualdez's administrative order would "disadvantage US and other pharmaceutical firms now operating in the Philippines to the extent that they may be forced to suspend or terminate their Philippine operations, reducing the access of Philippine consumers to innovative medicines"

  Secretary Daley also threatens that such an action on the part of the Philippines "may also increase domestic pressure in the US to reassess the appropriate level for preferential access to the US market for Philippine products"

  (Daley, William, Washington D.C., Letter to Jose T. Pardo, Manila, July 13th 1999).

• The Philippine Department of Health releases a revised version of its draft administrative order. Unlike previous drafts, which had not allowed the marketing of branded non-innovator pharmaceuticals (me-too products), the new draft makes registration of me-too drugs contingent upon local production.

  (See American Embassy, Manila. Cable to the US Secretary of State, Washington DC. 14 July 1999)

• An internal US State Department memo notes,

  Pharmaceutical industry executives are protesting the proposal, and have alerted Trade and Industry Secretary Jose Pardo to the potential trade repercussions of disallowing the use of trademarked pharmaceutical products. Pardo has told industry executives that he supports their stand, and will discuss the issue with Romualdez.

  (US Department of State, Untitled, Undated Memo.)

• Secretary Pardo assures State Department representatives that he joins the US and the pharmaceutical industry in their concern for intellectual property rights, and that any final administrative order will comply with WTO requirements.

  (See U.S. Department of State. Philippines -- Ambassador Again Raises Brand-Name Pharmaceutical Proposal with Trade Secretary. July 1999.)

  According to a July 1999 State Department Cable from the American Embassy to Secretary of State Madeline Albright, in a July 15th meeting with US Ambassador to the Philippines Thomas Hubbard, "Pardo said his department 'has made clear' its position that DOH should rethink issuance of the AO."

July 19th, 1999

• The Pharmaceutical Committee of the US Chamber of Commerce meets to discuss "strategy on the draft AO restricting use of Pharmaceutical Brand Names." At the meeting are representatives from major drug companies including Merck, Lilly, Pfizer, Abbott, Novartis, and Schering. Also represented is the Economic Office of the US Embassy (ECONOFF). According to a State Department cable, ECONOFF says it "sees no improvement" but is "awaiting formal comments/views from Washington, particularly on whether any WTO obligations are compromised." ECONOFF advises the pharmaceutical companies that "aside from the WTO, there is also the GSP angle." The Generalized System of Preferences (GSP) program allows certain imports from specified developing countries to enter the United States duty-free. The pharmaceutical representatives say they "have clear instructions from their home offices to fight the AO and not to negotiate." They are opposed by PHAP, which argues in favor of negotiating with Alberto Romualdez, since "PHAP's Legal Counsel says the grounds for challenging the AO under local law 'seem weak.'" A PHAP executive comments that the hearing scheduled for July 21st is "'just to meet the legal obligations' and that the AO is as good as signed." (American Embassy, Manila, Cable to the US Secretary of State, Washington DC, July 1999; available at http://lists.essential.org/pipermail/ip-health/2002-December/003915.html)

• President Joseph Estrada issues Executive Order 124, which makes senior Undersecretary of Trade and Industry (Lilia Bautista) a deputy special trade negotiator.

July 20th, 1999

• The American Chamber of Commerce meets with Secretary Pardo to discuss the drafted AO. ECONOFF says "it would be useful if the various subsidiaries also request separate meetings with Pardo . . . . so he gets the message that this is a big deal." (American Embassy, Manila, Cable to the US Secretary of State, Washington DC, July 1999; available at http://lists.essential.org/pipermail/ip-health/2002-December/003915.html)

• PhRMA writes to Marjory Searing, Deputy Assistant Secretary of Commerce for Asia and the Pacific, asking that she help "persuade the Government of the Philippines that the issuance of such an Administrative Order in the near term would be ill-advised" and that she "communicate as soon as possible with senior government officials in Manila."

July 21st, 1999

• The Philippine Bureau of Food and Drug (BFAD) holds a hearing on how to implement the AO. At the hearing, Deputy Director Dr. Kenneth Go confirms that the drafted order does not apply to pharmaceuticals under patent or over-the-counter drugs.

  (See U.S. Department of State. Philippines: Hearing on Draft Pharmaceutical Administrative Order. July 1999.)

  According to a cable from the American Embassy in Manila to US Secretary of State Madeline Albright,

  BFAD's Deputy Director reiterated that the objective of the AO is to lower the cost of pharmaceuticals in the Philippines and promote local manufacturing of pharmaceuticals. The hearing room was filled to capacity. Most of those making comments objected to the AO, and sought clarification on the meaning of various provisions. BFAD officials were unable to answer most of the questions. While BFAD's Director opened the hearing by saying BFAD was not prepared to revise the AO, and would be signing it shortly, in the end he accepted requests that BFAD set a period to receive written position papers, which will be due August 6 Manila time.

August 2nd, 1999

• The Pharmaceutical and Healthcare Association of the Philippines (PHAP) submits a position paper opposing the proposed administrative order to the Bureau of Food and Drugs. PHAP complains that "if, after a 1-3 year period of initial registration, the company is forced to offer generic products even though it is not commercially viable to do so, the company would opt not to market even the branded products, thus not enjoying the maximum benefits of its patent right." It argues, "The legitimate concern to limit public expenditure must not be allowed to jeopardize the future of pharmaceutical research." The letter is signed by PHAP's executive vice-president and C.E.O., Leo P. Wassmer, Jr., the former General Manager of Eli Lilly's operations in the Philippines.

August 4th, 1999

• According to State Department cable from US Ambassador to the Philippines Thomas Hubbard to US Secretary of State Madeline Albright,

  ___________ told us August 4 that PHAP is working "through an intermediary" to arrange a meeting with President Estrada to discuss the issue. _________ claims that the intermediary, who (sic) he declined to identify, is "close to the President," and that they are aiming for a meeting within the next two weeks. ______ says he, a representative of the multinational pharmaceutical companies _________________ and a representative of the local companies, would plan to "represent the industry" in the meeting.

  ECONOFF discussed PHAP's strategy with _____. _____________ told us August 5th that PHAP believes approaching the President is the best way to forestall issuance of the proposed AO. ECONOFF asked if the industry would be taking any proposals to the meeting, such as the proposal, mentioned by ______ during the Ambassador's meeting with ____________ to commission a survey of pharmaceutical prices in the region.

August 5th

• Thomas Hubbard, US Ambassador to the Philippines, reports to US Secretary of State Madeline Albright that "the industry has rejected the proposal to commission an outside survey of drug prices in the region, due to opposition from the head offices of several subsidiaries. We understand this opposition stems from antitrust concerns and concerns about the repercussions were the survey to find that certain drugs are more expensive in the Philippines." Hubbard comments, "It is unfortunate that the price survey idea appears to have been rejected. While we appreciate that counsel for some multinationals may be skittish out of antitrust concerns, a survey would have at least represented a good-faith initiative to respond to the widely-held perception that pharmaceutical prices in the Philippines are higher than in surrounding countries."

  (American Embassy, Manila, Cable to the US Secretary of State, Washington DC, 5 August 1999)

August 6th, 1999

• PhRMA submits a statement urging the Philippine government to withdraw the proposed Administrative Order. (PhRMA, Statement of the Pharmaceutical and Manufacturers of America (PhRMA), Manila: 6 August 1999)

September 23rd, 1999

• US Ambassador Thomas Hubbard sends a cable to US Secretary of State Madeline Albright, the US Department of Commerce, the US Mission to Geneva, and the US EU Brussels. Hubbard reports that US Embassy officials recently discussed the upcoming WTO trade policy review of the Philippines with the Economic Counselor at the European Delegation and found that the EC is likely to press many of the same issues, including the proposed administrative order, at the WTO policy review.

September 27th and 29th, 1999

• The World Trade Organization holds a Trade Policy Review on the Philippines. In advance of the meeting of the Trade Policy Review Board, the European Union submitted the following question:

  Can the government of the Philippines give assurances that all precautions are being taken to prevent any incompatibility between the draft of the new AO regarding initial registration and renewal of prescription pharmaceutical products and potential contravention of trademark protection under TRIPs agreement, as well as national treatment provision of Art III.4 of the GATT?

  The US posed a similar question in its written statements. The Philippine representative assured Western trade representative of his country's commitment to TRIPS as manifested in its implementation of the Intellectual Property Code. He also promised that

  The administrative order being drafted regarding registration and renewal of pharmaceutical products will take into account the views and opinions expressed by all sectors of society, including the objective of making available medicines to the general public at affordable prices, and commitments of the Philippines to the WTO."

  (See World Trade Organization. Trade Policy Review Body. Trade Policy Review: The Philippines. 15 November 1999.)

October, 1999

• The Philippine DOH announces that the National Health Insurance Program will use the average price of generic versions of a drug for reimbursements in an effort to encourage physicians to prescribe generic drugs.

  (U.S. Department of State. Philippines - Update on DOH Brand-Name Pharmaceutical Proposal. October 1999.)

October 5th, 1999

• Instead of moving ahead alone on the AO, the Department of Health (DOH) signs a Memorandum of Understanding with the Philippine Health Insurance Corporation, the Pharmaceutical and Healthcare Association (PHAP), The Chamber of Filipino Drug Manufacturers and Distributors and the Philippine Medical Association. The Memorandum creates the Pharmaceutical Affairs Consultative Committee (PACC) with representatives from each organization to mediate consultations between the government and the pharmaceutical industry. The question remains as to whether decisions will be made by consensus, as PHAP requests, or by majority. In the Memorandum of Understanding, PHAP is described as "an umbrella organization whose membership is comprised of pharmaceutical companies and health care providers operating in the Republic of the Philippines and desires to assist Government in the provision and delivery of affordable and cost based pharmaceutical drugs and medicines to the Filipino people, and participate in meaningful reforms initiated by Government."

  (Republic of the Philippines. Department of Health. Memorandum of Understanding. 5 October 1999)

  According to a State Department Cable, "the final MOU as signed is based on a draft that was negotiated between DOH and PHAP."

  (American Embassy, Manila, Cable to the US Secretary of State, Washington DC, October 1999)

• At the signing ceremony for the Memorandum of Understanding, Alberto Romualdez signs a new administrative order (AO 42), "Creation and Establishment of the Pharmaceutical Affairs Consultative Committee." This administrative order assigns the new committee an agenda, including a review of the proposal to market drugs as generics. The set agenda comes as a surprise to industry representatives. One pharmaceutical executive complains, "It looks like we signed our own death warrant."

  (American Embassy, Manila, Cable to the Secretary of State, Washington DC, October 1999)

October 8th

• Ernesto Herrera, a member of the Philippine House of Representatives, introduces House Bill 8660. US Ambassador Thomas Hubbard reports to Secretary of State Madeline Albright in an October 15th State Department cable,

  Multinational pharmaceutical companies continue to come under criticism for their pricing policies. In the latest move to try to force companies to reduce pharmaceutical prices, a prominent member of the Philippines House of Representatives, Ernesto Herrera, introduced on October 8 legislation intended to reinforce the Generics Act of 1988; to "emphasize moral obligation of medical and paramedical practitioners" to prescribe generic drugs; and to "ensure the adequate supply of drugs with generic names at the lowest possible cost." Herrera is a former Senator and a trade union leader.

  In an explanatory note accompanying the bill, Herrera states (verbatim quote): "The World Health Organization identifies the determinants of drug pricing as cost of production, discovery, distribution, and dispensation. These are mostly given factors that we can do nothing about. Yet there are special measures that would lower the cost of medicines. These include setting stiffer penalties for non-compliance with generic prescription, multinational corporations' (MNCS) disclosure of selling prices in different countries, liberalization of trade outlets, amending the policy on granting distributorship, amending the provision on patents, and conducting congressional oversight.

  Herrera's Bill, HB8660, would introduce penalties for violations of section 6(b) of the Generics Act, which mandates that "all medical, dental, and veterinary practitioners shall write prescriptions using the generic name." It would also amend Section 54 of RA 8293, the Intellectual Property Code, to modify the term of patent of pharmaceutical products to 20 years from the date of application. That section states that "the term of patents shall be 20 years from the filing date of the application." HB 8660 would add to that sentence the conditional clause, "except for pharmaceutical products which (sic) shall be 20 years from the filing date of the application, be it here in the Philippines, or outside of the Philippines.

  Section 5 of HB 8660 would allow parallel importation of pharmaceutical products by "more than one Philippine importer" or distributor. HB 8660 would also require multinational drug companies "to disclose their drug selling prices in the Philippines vis-a-vis in other countries," and would allow the Department of Health to establish penalties for non-disclosure.

  In his cable to Secretary Albright, Ambassador Hubbard says that he has brought the proposed legislation to the attention of PHAP and the American Chamber of Commerce's Pharmaceutical Committee.

  See American Embassy, Manila, Cable to the US Secretary of State, Washington DC, 15 October 1999

October 11th, 1999

• Leo P. Wassmer, Jr. of PHAP, Gozalo C. Galang of the Chamber of Filipino Drug Manufacturers and Distributors, Inc., and the Philippine Medical Association write to Secretary Romualdez, complaining that "Under this AO, the functions of the Committee had been severely restricted to involve recommendations on existing programs or proposed reform measures of the Department."

• The Pharmaceutical Research and Manufacturers of America (PhRMA,) publishes a draft of "Guidelines and Principles Paper on PACC Negotiations in The Philippines." Among the listed "overriding principles" is that "all interested parties (including foreign companies) should have equal and fair opportunity to participate in advisory committees, rule-making and legislative processes." (

  (Pharmaceutical Research and Manufacturers of America, Guidelines and Principles Paper on PACC Negotiations in The Philippines, October 1999)

October 12th, 1999

• Philippine DOH Secretary Alberto Romualdez holds a briefing with the US Ambassador, USAID Mission Director Patricia Buckles, and Embassy officials on his agenda for health policy.

  His comments are reported in an October 1999 cable from the American Embassy in the Philippines to US Secretary of State Madeline Albright:

  Romualdez asserted that pharmaceuticals account for at least 60% of total health care costs in the Philippines, a figure he said is "too high compared to other countries." He stressed that "prices are unreasonable, especially when compared to (those in neighboring countries)."

  Romualdez said the department will take a variety of actions to bring down the price of pharmaceuticals. First, he said DOH will look into the marketing practices of pharmaceutical firms and physicians' prescription patterns. Second, the government is discussing with some other countries proposals to source pharmaceuticals and/or raw materials for pharmaceuticals from those countries. Third, government is examining ways to "open the market to cheaper imports," mainly through changes to existing law of parallel importation. Fourth, DOH will revise the insurance reimbursement scheme for pharmaceuticals in order to promote use of generics. Fifth, secretary noted efforts to reform DOH's procurement system. Finally Romualdez said DOH is preparing enhanced regulatory processes for the inspection and accreditation of pharmaceutical manufacturing facilities, based on what USFDA does.

October 14th

• Paul Allen Brown, First Secretary of the Economic Section of the American Embassy, writes to Dr. Kenneth Go, Deputy Director of the Philippine Bureau of Food and Drugs and coordinator of the Department of Health's National Drug Policy Program with an objection to the assignment of a set agenda to the Pharmaceutical Affairs Consultative Committee. He states,

  We believe that it would be most fruitful for the agenda of the Committee to be determined by the participants themselves. As a member and chair, the DOH can, of course, suggest items for discussion. Other participants should also be able to put forward proposals as well. We believe that only through a consensus-based approach will workable solutions that are consistent with other international obligations be found to advance the goals of affordable, accessible health care for all Filipinos.

  (Brown, Paul Allen, Letter to Dr. Kenneth Go, Manila, 14 October 1999)

October 15th, 1999

• Pharmaceutical industry executives say that the inaugural meeting of the Pharmaceutical Affairs Consultative Committee was "better than expected."

  (American Embassy, Manila, Cable to the Secretary of State, Washington DC, October 1999)

October 18th, 1999

• PhRMA submits "suggested talking points" for Assistant United States Trade Representative Donald Phillips's upcoming meetings with Philippine government officials. The talking points include the following:

  We know from our experience in working with our pharmaceutical industry in other markets that they have a wealth of experience, and are truly interested in playing the role of cooperative partner in health care reform efforts in the Philippines, as in other countries both within and outside this region. I believe they have said this to your Government and I believe you can rely on their sincerity.

  Other talking points urge the Philippine government to "give serious consideration to the PACC's conclusions and recommendations."

• Lilia Bautista, Senior Undersecretary of the Department of Trade and Industry (and recently named deputy special trade negotiator), writes to Richard Fischer, Deputy United States Special Trade Representative in response his 3 August letter to Secretary Jose Pardo.

  Bautista writes,

  The Department will ensure all in its powers to address both the concerns, to provide lower cost medicines to the general public, as well as to abide by our international trade commitments. The creation itself of the Committee is an indication of the government's continuing desire to provide an avenue where meaningful dialogue with the private sector can be undertaken.

  (Bautista, Lilia R., Makati City, Letter to Richard W. Fischer, Washington DC, 18 October 1999)

October 23rd, 1999

• An October cable from the American Embassy in Manila to US Secretary of State Madeline Albright reads:

  In comments October 23, President Estrada reiterated calls for make pharmaceuticals more affordable. Estrada said, in Filipino, that "Medicines are very expensive, which is why I directed the Health Secretary to find ways to bring down the price of medicines." He did not outline any specific initiatives, other than nothing that government officials have had discussions with the Ambassador of India on sourcing pharmaceuticals from India.

October 26th, 1999

• The American Chamber of Commerce Pharmaceutical Committee meets with visiting AUSTR Don Phillips. According to an embassy cable:

  Ed Fiest, General Manager of Abbott Labs, said that Secretary Romualdez had met with the general managers of pharmaceutical manufacturers and discussed the possibility of importing pharmaceuticals and fine chemicals from India, and "distributing" them to manufacturers in the Philippines. Section 10 of the Generics Act authorizes, "During periods of critical shortages and absolute necessity," DOH to "import raw materials of which there is a shortage for the use of Filipino-owned or controlled drug establishments to be marketed and sold exclusively under generic nomenclature."

  Fiest summarized the issue confronting US Pharmaceutical subsidiaries as "how to establish a relationship with the DOH on how to get drugs to the poor."

  The industry is currently discussing a proposal to create an independent foundation to administer a scheme under which pharmaceutical firms would donate pharmaceuticals included in the DOH "Essential Drugs List" to the DOH for distribution to the indigent. There is a reluctance to propose formally a specific percentage of sales, out of a concern that this will lead to a negotiation with DOH, although discussion within the industry is concentrating on 1-5% of sales.

November 8th, 1999

• Alberto Romualdez vows to cut the price of pharmaceuticals by 30-60% in the next year. According to an article in the Philippine Daily Inquirer,

  Romualdez complained that multinational pharmaceutical companies wielded a "strong influence" and "can get foreign embassies to warn about sanctions" if the DOH pursued its plan to limit, if not totally ban, the use of branded drugs.

  (Gonzales, Stella O. and Nazareno, Rocky, "House to Probe Drug Firms" Philippine Daily Inquirer 9 November 1999, available at http://www.essentialdrugs.org/edrug/archive/200002/msg00075.php)

• Philippine House Majority Leader Mar Roxas announces he will launch an inquiry into high prices for medicine, which he attributes to "the pharmaceutical industry's dependence on marketing, advertising and promotions as a tool to ensure steady sales." He argues that the ''huge budget set aside by medical companies for the purpose of luring physicians into prescribing their drugs defeats the objectives and mission of the Generic Drugs Act.''

  (Gonzales, Stella O. and Nazareno, Rocky, "House to Probe Drug Firms" Philippine Daily Inquirer 9 November 1999, available at http://www.essentialdrugs.org/edrug/archive/200002/msg00075.php)

November 9th, 1999

• The Philippine House Committee on Health holds a hearing on two resolutions introduced by Deputy Speaker of the House Daisy Fuentes and a bill introduced by House Majority Leader Mar Roxas seeking to address the high pharmaceutical prices in the Philippines.
  • According to a 15 November cable from Michael Malinowski, Deputy Chief of Mission and Charge d'Affaires at the American Embassy in Manila, to Secretary of State Madeline Albright, Mar Roxas suggested a parallel importation system:

    Majority Leader Roxas floated the idea of creating a government entity to import and distribute (and possibly produce) certain pharmaceuticals, again citing Thailand as an example. In subsequent comments to the press, Roxas proposed the creation of a P2-billion ($50 million) medicine procurement program under the Department of Health to do this, until a new entity is created. Roxas said DOH would undertake the procurement and eventual sale of medicines that are most in demand, "giving poor patients a cheaper alternative to the higher-priced, branded medicines.

  • Philippine Health Secretary Dr. Alberto Romualdez and National Drug Policy Director Dr. Kenneth Hartigan-Go both testify at the hearing. The same 15 November State Department cable reads:

    Secretary Romualdez said the Generics Act of 1988 failed in its purpose of reducing the cost of pharmaceuticals and the "market dominance" of the multinational pharmaceutical companies. He contended that prices remain "unreasonably high," the pharmaceutical industry's profits are "unjustifiably high," the number of registered brand-name drugs has increased dramatically ("creating confusion among consumers"), and the share of the local market held by multinational pharmaceutical companies has remained constant. Dr. Hartigan-Go blamed transfer pricing, distribution and retail mark-ups, and marketing expenses as the prime reasons behind the alleged high pharmaceutical prices. He also asserted that the high price of branded pharmaceuticals leads generic producers to set prices for their drugs at levels just below those of their branded competitors.

    In his comments to the committee, Secretary Romualdez outlined several proposals, similar to what he subsequently described to us: closely regulating marketing expenses; forcing local production of non-branded pharmaceuticals or limiting the registration of branded products; making it illegal for physicians to accept compensation from pharmaceutical companies; and creating a government entity to import raw materials and produce essential off-patent drugs. Romualdez spoke of Thailand as a model in this regard. He said, "There would be inherent inefficiencies if the government got involved in production," and explained he does not personally support this option. In comments to the press, Secretary Romualdez also said that price controls are a "last resort" option that could be imposed before the end of the year if other measures fail to bring down the cost of drugs.

November 10th, 1999

• President Estrada makes public comments affirming his commitment to cutting pharmaceutical prices.

  In comments November 10, President Estrada reiterated that he is committed to cutting pharmaceutical prices. Estrada said, "We have lowered the price of rice and sugar, my next target is to bring down the price of medicines." He asserted prices of medicines in the Philippines are much higher than in other developing countries, asserting: "In India, they charge only 10 percent of what the medicines cost here. The quality is the same so we are closely looking at this." The President's spokesman told journalists the President has ordered the investigation of the drug firms for "transfer pricing" and that the government is studying setting up of distribution centers for low-priced medicines.

  See American Embassy, Manila, Cable to the US Secretary of State, Washington DC, 15 November 1999

November 15th, 1999

• In a cable to US Secretary of State Madeline Albright, Michael Malinowski, Deputy Chief of Mission and Charge d'Affaires at the American Embassy in Manila, summarizes the state of affairs in his comments:

  Pharmaceutical prices are now a politicized issue, and one with little or no downside. The issue is now being portrayed as pitting greedy foreign drug companies against poor, sick Filipinos. President Estrada's advisers may also see action on this issue as a way to restore the recent drop in the President's popularity. DOH clearly has a mandate to act, and is actively working with key members of Congress and the Senate to develop legislation it believes will force down the price of pharmaceuticals. Championing lower medicine costs is politically attractive, especially to those who, like Rep. Roxas, are up against term limits and have higher political aspirations. Having failed to respond effectively to the charges of overpricing leveled against it, the pharmaceutical industry now finds itself facing the possibility of a legislated solution. DOH is clearly prepared to run the risk of a trade dispute, confident it has the President's support for its end objectives, and believing that it can easily justify its actions in terms of making pharmaceuticals more affordable for poor Filipinos.

November 21st, 1999

• Philippine Secretary of Health Alberto Romualdez issues Administrative Order 48-C, which requires the submission of the suggested retail price for a new pharmaceutical product as part of the registration process for the new drug.

  (See American Embassy, Manila, Cable to the US Secretary of State, Washington DC 28 January 2000)

November 22nd, 1999

• PhRMA writes to Marjory Searing, Deputy Assistant Secretary of Commerce for Asia and the Pacific, to invite her to the Winter Meeting of the PhRMA International Section Asia-Pacific Committee in December. PhRMA thanks Searing for her "sage advice on issues related to our industry's goals and objectives in this important part of the world," offers to cover airfare from Washington DC to New York and a room at the Essex House Hotel, and announces a dinner at her honor in a private room at the Judson Grill. PhRMA writes, "The dinner also should provide the occasion for a more informal discussion of our issues in the region."

  (Roger A. Brooks, Washington DC, Letter to Marjory Searing, Washington DC, 22 November 1999)

November 24th, 1999

• The Philippine House Committee on Health holds a second hearing. In a cable to Secretary of State Madeline Albright US Ambassador Thomas Hubbard reports that House Majority Leader Mar Roxas and Representative Naciso Monfort, author of the Generics Act, blamed the multinational pharmaceutical industry's high market costs and company greed for the high prices.

November 26th, 1999

• Ambassador Hubbard sends a cable to Secretary of State Madeline Albright announcing that representatives from the US Embassy's Economic Office have met with both members of the House who have introduced legislation, Speaker Daisy Fuentes and House Majority Leader Mar Roxas.

  ECONOFF met separately with _____________________________ both of whom have introduced legislation to address the alleged high prices of pharmaceuticals in the Philippines. _______ who files the two resolutions that were the subject of the last hearing of the House Committee on Health, said ___ is not hostile to the industry's interests, and wants to have a better understanding of factors that might lead to prices inn the Philippines being higher than in other countries. _______ noted that questions have been raised about the accuracy of the data on prices furnished by the DOH (and which she included in a resolution filed on the issue - see Ref A), and said this is why _______ have asked the Department of Trade and Industry (DTI) to conduct, with the help of RP Embassies abroad, its own survey of pharmaceutical prices.

  During the conversation, Representative Fuentes questions US Embassy representatives about their involvement in pressuring Philippine officials:

  ________ asked whether the statement of Secretary Romualdez, at the Health Committee hearing, that foreign embassies had been putting pressure on DOH and the government on behalf of the industry, was accurate. ECONOFF explained that the DOH had circulated draft administrative orders that conflicted with Philippine WTO and other obligations. We had pointed out the WTO problems and urged that any action fully respect those obligations.

  Embassy officials met skepticism when discussing such WTO and intellectual property obligations with Representative Roxas:

  _____ said his preferred option is to implement parallel importation, perhaps through the DOH or a state-administered foundation, which would purchase pharmaceuticals in India or Thailand - at wholesale prices direct from the manufacturer - and resell them locally. ECONOFF asked whether such a plan would involve only off-patent pharmaceuticals or on-patent ones, or both. _____ said the focus would be on brand-name drugs, both on and off patent. We commented that this option would impact on intellectual property rights. _____ countered that "We're talking about a legitimate operation of the free market: if something is cheaper somewhere else, why can't we buy it there and import it here? What could be more free trade than that?" _____ said that, if such a system violated WTO rules, "then too bad." He also commented that, if the pharmaceutical industry can't accept such an arrangement, "We'll continue to ask them to explain why the same pharmaceuticals cost ten times here what it does in India." _____ reiterated that he does not understand how a free market operation - buying a product in one market for sale in another - would be contrary to trade rules."

December 1999

• The Philippine Department of Health issues a statement to the US Embassy in Manila that echoes Secretary Romualdez's 12 July letter to US Economic Counselor Terry Breese. It reads, "The protection of intellectual property rights, especially that of individuals and institutions who have obviously taken undue advantage of such rights, cannot take precedence over the higher good of protecting the lives of Filipino children and promoting the health of the Filipino people." It continues, "The DOH holds that restrictions and regulations in any aspect of the commerce and trade of pharmaceutical products are necessary to protect the public against both effects of unbridled marketing activities of profit-oriented individuals and institutions."

  (Republic of the Philippines. Department of Health. Responses to US Embassy Proposals in NDP. December 1999)

January 2000

• Mar Roxas, former Philippine House Majority Leader, is appointed Secretary of Trade and Industry. He replaces Jose Pardo, who becomes Secretary of Finance. US Deputy Chief of Mission to the Philippines Michael Malinowski comments in a 24 January cable to Secretary of State Madeline Albright,

  Roxas' appointment as DTI Secretary has given Health Secretary Romualdez a new and important ally. With DTI on board, Romualdez will find it easier to pursue his agenda -- which Roxas shares -- of bringing down pharmaceutical prices. We continue to believe that the government has backed away fully from any actions that would be WTO-inconsistent, having received our warnings loud and clear. However, that leaves parallel importation or price controls as options, neither of which are very palatable to US pharmaceutical subsidiaries.

January 17th, 2000

• The Philippine Bureau of Food and Drugs (BFAD) and the National Drug Policy Program (NDPP) hold a public hearing on a proposal to amend the Counterfeit Drug act to allow parallel importation. The proposal would delete the following sentence from the act: "If the unregistered imported drug product has a registered counterpart brand in the Philippines, their product shall be considered counterfeit."

  (American Embassy, Manila, Cable to the US Secretary of State, Washington DC, 28 January 2000)

January 20-21, 2000

• Philippine Health Secretary Alberto Romualdez and new Trade Secretary Mar Roxas meet with PhRMA representatives. PhRMA tells US Embassy officials that the talks were "frank" but no resolution was reached. According to the PhRMA, Roxas "insisted that DTI and DOH are under pressure from President Estrada to lower the price of medicines."

  (See American Embassy, Manila, Cable to the US Secretary of State, Washington DC, 24 January 2000)

January 26th, 2000

• The Philippine Bureau of Food and Drugs and the Department of Health's National Drug Policy Program hold a second hearing on changes to the Counterfeit Drug Act. PHAP's counsel argues at the hearing that the Counterfeit Drug Act's provision that unregistered products with a registered counterpart is necessary because of "a persistent problem" of counterfeited imported drugs. He also claims that parallel importation would violate the rights of PHAP members to "exploit their trademarks as they see fit." The Economic Office of the American Embassy also issues brief oral comments at the hearing, declaring its hope that "the government would look closely at the proposal's implications, form the standpoints of intellectual property rights and possible effects on the existing operations of pharmaceutical production in the Philippines.

  (See American Embassy, Manila, Cable to the US Secretary of State, Washington DC, 28 January 2000)

February, 2000

• US Embassy officials learn that the Philippine Department of Health is considering a new administrative order regulating the registration of branded pharmaceuticals. According to a 24 February cable from US Ambassador to the Philippines Thomas Hubbard to US Secretary of State Madeline Albright,

  The new draft would limit the registration of branded pharmaceutical products to innovator products and products manufactured by local drug manufacturing companies. Branded prescription pharmaceuticals which are not innovator products or manufactured locally will be eligible for renewal registration only if they have a generic equivalent made available to the public in the same volume as the branded equivalent, and the price of the branded equivalent is reduced by 50% from the prior year price.

February 17th, 2000

• American Embassy officials and visiting US Department of Commerce International Trade Administration Director for the Philippines Philip Agress meet to discuss pharmaceutical trade issues with Philippine officials and industry executives. Philippine National Drug Policy Program Director Dr. Kenneth Hartigan-Go tells Agress that the government is actively pursuing a parallel importation strategy, and that government officials and private sector representatives will travel to India the week of February 21st to research their options. Dr. Hartigan-Go agrees with Agress that sub par generic drugs are a problem. He tells Agress that he wants to "really come down hard" on some manufacturers of generics, but that he is "being held back" by "powerful people."

  (American Embassy, Manila, Cable to the US Secretary of State, Washington DC, 24 February 2000)

February 18, 2000

• Members of the American Chamber of Commerce complain to Department of Commerce International Trade Administration Director for the Philippines Philip Agress that the proposed regulations would affect products no longer under patent, which account for 85% of products in the market; whereas innovator products account for only 15% of total sales.

  (American Embassy, Manila, Cable to the US Secretary of State, Washington DC, 24 February 2000)

USA

PhRMA

The Pharmaceutical Research and Manufacturers of America (PhRMA) is an association representing the largest American manufacturers of pharmaceuticals.

Philip Agress

Agress served as US Department of Commerce International Trade Administration Director for the Philippines. In June 2000, he was acting Deputy Assistant Secretary for the US Department of Commerce Delegation to the Asia Pacific Economic Corporation. As of February 20005, he is Vice President of Global Strategy and Analysis for Advamed, the world's largest medical technology association.

Madeline Albright

Albright served as US Secretary of State under President Bill Clinton from 1997 until 2001.

William Daley

Daley served as US Secretary of Commerce from January 1997 until June 2000. He was chairman of Al Gore's campaign for the US presidency from June 2000 until December 2000. From November 2001 through May 2004, he was president of telecommunications company SBC. In October 2004, he was named to the Board of Directors of Abbott Laboratories, a major US pharmaceutical company.

Richard Fischer

Fischer served as Deputy United States Special Trade Representative under USTR Charlene Barshefsky through January 2001.

Thomas Hubbard

Hubbard, the former US Ambassador to the Philippines from July 1996 through August 2000, was Principal Deputy Assistant Secretary of State for East Asian and Pacific Affairs from August 2000 to July 2001, and served as Ambassador to South Korea from September 2001 to July 2004. As of February 2005, he is Senior Advisor to Akin, Gump, Strauss, Hauer and Feld LLP, the 18th largest US law firm in 2004, which he joined in November 2004.

Charlene Barshefsky

Barshefsky, the United States Trade Representative from 1997-2001 under President Bill Clinton, is as of February 2005 Senior International Partner at Wilmer, Cutler, Pickering, Hale, and Dorr, LLP. Since June 2002, Barshefsky has been a director of Idenix Pharmaceuticals, a biotechnology company acquired in May 2003 by Novartis. Ambassador Barshefsky also serves on the corporate Board of Directors for American Express, Estee Lauder, Intel, and Starwood Hotels and Resorts.

Terry Breese

Breese served as the Economic Counselor at the US Embassy in Manila. As of February 2005, he is the Department of State's Director of Canadian Affairs.

Paul Allen Brown

Brown served as First Secretary of the Economic Section of the US Embassy in Manila. As of January 2004, he was Economic Section Chief of the US Embassy in Singapore.

Jean Kelly

As of April 2004, Kelly was the Philippine Desk Officer for the Department of Commerce's International Trade Administration.

Marjory Searing

As Deputy Assistant Secretary of Commerce for Asia and the Pacific, Searing was aggressively courted by PhRMA for her expertise and influence in Philippine trade issues. President Bill Clinton appointed Searing as Assistant Secretary and Director General of the U.S. and Foreign Commercial Service of the U.S. Department of Commerce in January 2000. In February 2001, she joined consulting group Civic Service as Executive Vice President. In September 2002, she was named Executive Vice President of Global Strategy and Analysis for AdvaMed, an association of the major producers of manufacturers of medical devices, diagnostic products and medical information systems. AdvaMed members produce 50% of the health care technology products consumed internationally and 90% of those in the US market.

Donald Phillips

Phillips was Assistant US Trade Representative to the for Asia-Pacific and Asia Pacific Economic Cooperation (APEC) Affairs until January 2000, when he was appointed Assistant United States Trade Representative (AUSTR) for China, Hong Kong, Taiwan and Mongolia, where he served until January 2001.

Thomas R. Pickering

Pickering was Under Secretary of State for Political Affairs from May 1997 through January 2001 under US President Bill Clinton. Since January 2001, he has been Senior Vice President for International Relations for Boeing and a member of the Boeing Executive Council.

Leo P. Wassmer, Jr.

Wassmer, the former General Manager of Eli Lilly's operations in the Philippines, serves as Executive Vice President and CEO of PHAP.

Michael Malinowski

Malinowski served as Charge d'Affaires and Deputy Chief of Mission at the American Embassy in Manila until October 2001. From then until April 2004, he was the US Ambassador to Nepal.

Philippines

Alberto Romualdez

Romualdez served as Secretary of Health until the fall of the Estrada administration in the spring of 2001. As of March 2004, he was President of Friendly Care Foundation, a private-sector network of accessible and affordable clinics in the Philippines.

Jose Pardo

The former Department of Trade and Industry Secretary later served as Secretary of Finance (March 2000-January 2001) and Vice Chairman of the Economic Coordinating Council. He is as of February 2005 Chairman of the Board of the Philippine Savings Bank.

Joseph Estrada

Estrada was President of the Philippines from June 1998 until January 2001, when after months of political turmoil and scandal, the Philippine Supreme Court named Gloria Macapagal-Arroyo President of the Philippines. As of February 2005, he remains under house arrest.

Juan Flavier

Dr. Flavier served as the Chairman of the Senate Health Committee in the Philippines until January 2004. He served from 1992 through 1995 as Philippine Secretary of Health under President Ramos, and has been a senator since 1995. He is as of February 2005 Senate President Pro-tempore.

Lilia Bautista

Bautista, Senior Undersecretary at the Department of Trade and Industry, became a Deputy Special Trade Negotiator in July 1999. She later served as chairman of the Philippine Securities and Exchange Commission from 2000-2004. In 2004 she was named the Philippines' Ambassador to Belgium.

Nelly Favis-Villafuerte

As of January 2005, Favis-Villafuerte continues to serve as Undersecretary for Regional Operations for the Department of Trade and Industry.

Kenneth Hartigan-Go

Dr. Go was appointed Deputy Director of the Philippine Bureau of Food and Drug and Director of the Department of Health's National Drug Policy Program in 1999. In 2001, he became a professor in the Department of Pharmacology and Toxicology of the University of the Philippines College of Medicine. He is as of February 2005 Executive Director of the Zuellig Foundation, a non-profit organization promoting Philippine public health, a practicing internist and toxicologist, and a consultant to the Philippine Health Insurance Corporation.

PHAP

The Pharmaceutical and Healthcare Association of the Philippines is an umbrella organization of local subsidiaries of multinational pharmaceutical companies.

William Torres

Dr. Torres served as Director of the Philippine Bureau of Food and Drug from 1999 through the summer of 2002. As of June 2004, he was a professor at the College of Pharmacy, University of the Philippines in Manila.

Daisy Fuentes

Fuentes served as a member of the Philippine House of Representatives for three terms. She was Deputy Speaker of the 11th Congress of the Philippines. In 2001, she was elected Governor of South Cotabato.

Mar Roxas

Roxas was elected to the Philippine House of Representatives in 1993. In January 2000, he was appointed Secretary of Trade and Industry by President Joseph Estrada. As of February 2005, he is a Senator.