PRIORITY WATCH COUNTRY

Brazil

Intellectual Property Protection

In May 1996, Brazilian President Fernando Hernrique Cardoso signed the into law a bill designed to protect industrial property (No. 9279/96), containing language which includes among other provisions a 20-year product patent term; pipeline protection for products in the approval process; basic biotech in line with the TRIPS Agreement; a ban on parallel imports; and a one-year implementation period for patent protection for certain products (the TRIPS allows Brazil until 2005). Reflecting its confidence in Brazil and recognition of the significance of what was regarded as a generally strong law, the research-based pharmaceutical industry committed in the neighborhood of US$2 billion in inward investment to Brazil by 2000.

However, in enacting the law, Brazil included a provision that prohibits importation as a means of satisfying the requirement that the patent be "worked" in that country. Article 68 of the Brazilian Industrial property law requires domestic exploitation of the subject matter of a patent. Importation may only satisfy this requirement if local manufacture is not feasible, a requirement that is inconsistent with the terms of TRIPS Article 27.1. Our industry is very concerned about this provision, as hopes that it could be resolved quickly at the local level have faded. Brazil stubbornly refuses to address this violation, and has invited a WTO case to resolve the issue. The adverse impact of this provision loom closer for company patents, and have begun to affect the "siting" decisions of PhRMA member companies. Based on the seriousness of this issue for research-based pharmaceutical companies operating in Brazil, PhRMA requests that Brazil be included in the 2000 "Special 301" Priority Watch List.

The status quo was further aggravated by issuance of a Presidential Decree on October 6, 1999 regulating the implementation of Article 71 of the Law, which governs the grant of compulsory licenses in broadly defined situations of national emergency. Beyond any definition-related concerns, this particular Decree is troubling because of the absence of any dialogue with industry prior to its publication, the broad discretionary powers given to officials below the presidential level, the apparent inconsistency with TRIPS obligations, and subsequent potential benefit to domestic manufacturers, and the mandatory transfer of technology considered in Article 5.

In addition, "Medidas Provisorias" (Temporary Measures) issued in December 1999 require that, under a revised Article 229-C to the Law, the National Sanitary Supervision Agency (ANVS) approve all patent applications related to pharmaceutical products or processes. Its consistency with the anti-discrimination clause of TRIPS Article 27.1 is questionable, as products from other industries are not subjected to the same review by relevant regulatory authorities. Also, any review of the applications other than for the patentability criteria set forth in TRIPS Article 27.1 would not be consistent with the Agreement, and any review of the patentability criteria would be beyond the expertise of ANVS. The measures are under review to consider potential implications for pipeline applications claiming processes.

Additional inconsistencies of Brazilian legislation, particularly with TRIPS Article 27, have been identified. Among them are various exclusions from patentability, forfeiture of patent rights, term of protection, and the absence of protection for protected test data and possibly other confidential, valuable information against unfair commercial use (Brazil fails to provide TRIPS-consistent data exclusivity per Article 39.3).

We believe that adequate and effective implementation of aspects of the law consistent with Brazil's international obligations is critical. As such, our industry reiterates its endorsement of actions that will support education, training, and other activities of members of the National Institute of Industrial Property (INPI).

In addition to addressing the aforementioned issues, it would be useful for INPI to improve its approval of pharmaceutical patents applications, including the precedent-setting pipeline patents, by committing institutional resources to better address the existing backlog. Other steps for improving the level of intellectual property protection can be taken by establishing "linkage" requiring an interface between the INPI and the Board of Health, to preclude the grant of marketing approval to products patented by others during the patent term. Regardless, the issues identified are extremely significant commercially, and need to be resolved expediently, including the possibility of pursuing a WTO case and moving quickly to request a panel.

Damage Estimate

PhRMA is currently studying methodology for estimating damages caused by the aforementioned trade barriers in Brazil (see Appendix B). However, it is fair to say that the potential damage to Brazil's investment climate from the foregoing problems will exceed the substantial damage to PhRMA member company interests. Brazil is the largest market for pharmaceuticals in South America, and enhanced patent protection will significantly benefit the U.S. research-based pharmaceutical companies, which lose hundreds of millions of dollars annually to patent piracy around the world. Brazil's improved patent protection regime had started to become a positive example for the developing countries in Latin America and worldwide with inadequate patent protection. Brazil should understand that if it is to retain international investor confidence, particularly from an industry that has responded by investing large amounts of new capital into Brazil, it is important to send a consistent, coherent message.