Minutes - TRIPS Council - View details of the intervention/statement

H.E. Ambassador Dr Walter Werner
377.   I would like first to thank China, India and South Africa for co-sponsoring document IP/C/W/643. The communication builds on document IP/C/W/630, with the goal of expanding the discussions on the complex interplay between intellectual property and public interest. The debate of the relation between intellectual property and competition lies at the heart of the IP system and is certainly of interest to this Council. 378.   In economic terms, the temporary exclusivity on the market granted by a patent is expected to generate long-term dynamic pro-competitive innovation at the cost of short-term anticompetitive effects. Considering this theoretical background, policymakers strive to design an efficient and balanced patent system, avoiding a situation in which patents or other intellectual property rights lead to inefficiencies, high prices or the under-provision of goods. 379.   The Brazilian Constitution establishes an explicit foundation for competition policy. Article 170 states that the "economic order" of Brazil shall operate with "due regard" for certain principles, including "free competition," "the social role of property," "consumer protection," and "private property." 380.   One way to pursue competition law and to achieve health outcomes is to prevent illicit conducts such as cartels and illegal unilateral conducts. Another way is to prevent the formation of undue mergers in the pharmaceutical sector. 381.   Our competition authority is CADE, the Administrative Council for Economic Defence. It has recently concluded an investigation of a cartel in the segment of implantable cardiac pacemakers. The companies involved were being accused of facilitating and promoting the adoption of anticompetitive practices, including through price collusion. Due to the violation of the economic order, fines totalling approximately R$ 6 million were imposed. 382.   By investigating and punishing cartels, CADE prevents this kind of practice, decreasing the price of medicines and medical products that were artificially high due to anticompetitive practices. This helps to achieve public policy goals by making health services more accessible. 383.   Specifically to intellectual property, I would like to provide an example of how IP rights may be used in an anticompetitive way. The case was initiated during the years 1990s but only concluded in the 2000s due to the complexity and the tactics of the company. The defendants were accused from abusing exclusive market rights in relation to a medicine called Gemcitabine. Gemcitabine, sold under the brand name Gemzar, is a chemotherapy medication used to treat different types of cancer. These include breast cancer, ovarian cancer, non-small cell lung cancer, pancreatic cancer, and bladder cancer. 384.   The patent was initially filed in the United States in 1983 and was approved for medical use in 1995. The company filed the patent in Brazil in 1993 for the production process of the substance, as the compound itself was not novel by then. Since our pre-TRIPS legislation did not provide for the protection of pharmaceutical products, the company requested that the mechanism provided in Article 70.8 TRIPS be applied. However, the patent did not relate to a product, only to a process, thus being outside of the scope of Article 70.8. 385.   After Brazil's patent office had rejected the patent application, the company tried to transform its limited "process patent" into a "product patent" application, through an amendment to the original patent application. 386.   Additionally, the company requested to one federal judge the suspension of the INPI decision process. To a second federal judge (who was unware of the first request), the company complained that INPI was excessively delaying a final decision in her case. Because of that, it asked for protection under Article 70.9 TRIPS, which provides that, until a product patent is granted or rejected by the procedure established in Article 70.8, the company or the individual has, for the period of 5 years, exclusive marketing rights. The only problem, in this case, was that the delay was caused by the company itself. 387.   Unaware of the request to suspend the processing of the patent application, the second federal judge granted exclusive marketing rights for Gemcitabine when used to treat a specific kind of cancer. Not satisfied with this result, the company went to a third judge and claimed unrestricted exclusive marketing right for all kinds of cancer, well beyond the scope of the original decision. An injunction was granted, extending the protection for eight additional months, blocking a generic competitor from offering the drug in the meantime. The result is that during that period the price of the drug in public bids was more than double the price offered by the same company when the injunction was rejected (from 540 reais or US$144 to 189 reais). 388.   That is why CADE understood that the company abused her exclusive rights and was liable for "sham litigation". CADE imposed a fine of 36.6 million reais or US$10 million dollars. There was no need to issue a compulsory license in this case, as the defendant did not have any legal and valid patent. This Antitrust Law decision is important not only for this case, but also to signal to other enterprises that this kind of illicit strategy will be punished in the Brazilian Juridical System. 389.   In this respect, it is important to underline that Brazil never used Article 31(k) TRIPS as a remedy for an anticompetitive practice. While the single case of a compulsory license issued in Brazil did involve a medical product, its issuance was based on public non-commercial use to treat HIV patients. 390.   In recognition of the underlying public policy objectives of national systems for the protection of intellectual property, including developmental and technological objectives, Articles 7 and 8 of the TRIPS Agreement contain clear language regarding the relationship between public interest and the protection and enforcement of intellectual property rights. Further, Articles 31(c), 31(k) and 40 of the Agreement recognize that the exercise of intellectual property rights may entail anticompetitive effects. 391.   In the field of medical products, it is of particular importance to assure that the exclusive right granted to the patent, trademark or other right holder does not become itself a hindrance to technological innovation and access to medicines. 392.   Past government reports in the pharmaceutical sector have shown that the anticompetitive use of patents not only reduces the welfare of society by restricting access to off-patent medicines, but also affects innovation activities in the pharmaceutical sector, impacting the generation of new life-saving medicines. Regardless of each Member's level of development, it must be stressed that competition law is essential to ensure that the intellectual property system works properly and fulfils its goals. 393.   We hope this document fosters the debate about TRIPS and its relationship with competition law. The cases and examples mentioned today are part of a non-exhaustive list of what happened in Brazil, in relation to competition law and public health outcomes. We invite other delegations to join the debate, allowing us to have a rich exchange of views and experiences.
44.   The Chair said that China and South Africa had initially requested the agenda item on Intellectual Property and the Public Interest: Promoting Public Health through Competition Law and Policy". It had also been cosponsored by Brazil and India. A communication had been circulated in document IP/C/W/643 and its addendum.
45.   The representatives of South Africa; Brazil; China; India; Indonesia; the United States; the European Union; Switzerland; the Republic of Korea; Australia; Japan; New Zealand; and UNCTAD took the floor.
46.   The Council took note of the statements made.
IP/C/M/89, IP/C/M/89/Add.1