PRIORITY WATCH COUNTRY

Israel

Intellectual Property Protection

The Government of Israel has recently taken some very significant actions that cumulatively have weakened intellectual property protection for the research-based pharmaceutical industry in Israel and undermined the industry's investments in Israel, which have increased substantially during the past two years.

Last year, the Government of Israel enacted legislation amending the Patent Act to allow local companies who are not patent owners or licensees to manufacture patented material prior to patent expiry in order to submit registration data to health authorities in Israel and elsewhere. This law represents TRIPs 27, 28, and 33 violations.

Implementation of this law allows Israeli manufacturers who do not have any rights to the patent to conduct large-scale manufacturing in Israel during the life of the originator's patent. The new law permits the manufacture and export of tons of patented product before patent expiry. As effective patent life in Israel averages only about eight years, this change to Israel's law further undercuts patent term in Israel.

Recently, the Government of Israel amended the Pharmacists Law to permit the unauthorized importation of both patented and off-patent drugs. Although the law does not amend the Patent Act and the Government of Israel has admitted that parallel importation of patented drugs constitutes patent infringement under Israeli law, enactment of this law will make it very difficult for right holders to effectively exercise their patent and trademark rights and keep infringing pharmaceutical products off the Israeli market. Furthermore, by permitting the unsupervised importation of drugs essentially similar to those already registered in Israel, the new law poses severe public health risks and could in effect sanction the abrogation of trademark rights by Israeli sick funds.

The enactment of these two laws, together with the continuing absence of any protection for proprietary data provided by drug originators for obtaining marketing authorization, as required by TRIPs Article 39.3, is very troubling and raises serious trade barriers to American investment in Israel.

Market Access

Current practices of the Israeli sick funds, such as their campaign to introduce parallel imports into Israel and to give preferential treatment in product listings and reimbursement schedules to local suppliers, make it difficult for U.S. firms to fully commercialize innovative products in the country, and deny fair and equitable market access for U.S. pharmaceutical firms.

Potential Exports/Foreign Sales

It is not possible to provide a reliable current estimate of the potential market size for PhRMA member companies in Israel, if current deficiencies there were to be rectified. However, a number of PhRMA member companies report that these developments are having a chilling effect on plans for future investment.

For all the aforementioned reasons, PhRMA believes that Israel should be listed as a Priority Watch Country under Special 301 in 1999.