Cablegate: Philippines Issues Cheaper Medicines Act Implementing Rules

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OO RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHML #2611/01 3310854
ZNR UUUUU ZZH
O 260854Z NOV 08
FM AMEMBASSY MANILA
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UNCLAS SECTION 01 OF 02 MANILA 002611

STATE FOR EAP/MTS, EAP/EP, AND EEB/TPP/IPE
STATE PASS USTR FOR BWEISEL, RBAE AND KEHLERS
STATE ALSO PASS USAID, OPIC
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SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: ECON ETRD EINV KIPR SOCI TBIO RP
SUBJECT: PHILIPPINES ISSUES CHEAPER MEDICINES ACT IMPLEMENTING RULES
AND REGULATIONS

REF: A) Manila 497 B) Manila 2418

1. (SBU) Summary: The Philippine government recently issued
implementing rules for the Cheaper Medicines Act, covering
intellectual property, parallel importation, retail price controls,
and labeling requirements on generic drugs. Local and foreign
stakeholders remain skeptical that the law will reduce prices of
medicines. Despite Post engagement with the Philippine departments
and agencies that drafted the rules, there remain important USG
concerns, especially on compulsory licensing, that were not
addressed and that will require monitoring. End summary.

Released Implementing Rules to be Effective this Month
--------------------------------------------- ---------

2. (U) The Philippine Department of Trade and Industry, Department
of Health, the Intellectual Property Office, and the Bureau of Food
and Drugs have jointly issued the implementing rules and regulations
for the Cheaper Medicines Act that President Gloria Arroyo signed in
June. The implementing rules include provisions that limit patent
rights, facilitate the use of inventions by the government, ease
restrictions on compulsory licensing, permit parallel imports, and
require retail drug outlets to stock imported patented drugs and
medicines. The rules also empower the Health Secretary to determine
maximum retail prices for drugs and require generic medicines to
bear a notice that "this product has the same therapeutic efficacy
as any other generic product of the same name."

PHAP Active During the Public Hearings
--------------------------------------

3. (SBU) The Philippine government conducted seven public hearings
in different parts of the country. The Pharmaceutical and
Healthcare Association of the Philippines (PHAP), the representative
of most pharmaceutical multinationals, was silent during the first
public hearing (reftel A) but actively participated in subsequent
hearings. Econoffs noted that some individual PHAP member firms
like Sanofi Aventis, despite being members of PHAP, also made
representations as individual companies. PHAP officials told
Econoffs that PHAP also submitted position papers on the
implementing rules.

Pfizer No Longer a PHAP Member
------------------------------

4. (SBU) According to PHAP, Pfizer left the association more than
two months ago. PHAP executive director Reinier Gloor explained
that member firms of PHAP had different views on the medicine bill,
and generally, PHAP adopted the view taken by the majority of its
members. Pfizer, according to Gloor, had been in the minority on
several recent issues and concluded that PHAP did not represent its
views effectively. We did not notice Pfizer taking active part in
the regulation process.

PHAP Supports Effective Implementation of New Medicine Law
--------------------------------------------- ----------

5. (SBU) PHAP, despite having concerns regarding the implementing
rules related to maximum retail prices, new use patents, generic
labeling and parallel imports, issued a statement supporting
implementation of the Cheaper Medicines Act. It thanked the
Department of Health and Intellectual Property Office for the
consultation process, and called the Act "a step towards attainment
of an integral and comprehensive approach to health development."
PHAP also reiterated its commitment to participate in healthcare
reform initiatives.

Local Firms Take on Cheaper Medicines Law
------------------------------------------

6. (SBU) Econoffs met with officials of United Laboratories
(Unilab), a Filipino-owned pharmaceutical firm operating throughout
Southeast Asia that has a 20 percent share of the Philippine
pharmaceutical market. Unilab CEO Carlos Ejercito was still
concerned about the rules for maximum retail price, therapeutic
efficacy and generic labeling, parallel importation, and patent
infringement. Ejercito said that the cheaper medicines law will
definitely not bring down medicine prices in the short term, and

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further reform would be necessary to bring prices down in the long
term.

7. (SBU) According to Unilab Corporate Vice-President Joey Ochave,
prices of medicines ought to come down in the next few years due to
expiration of patents on "blockbuster" drugs, even without the new
law. He said that over the next few years the generic market will
be highly competitive as research companies, without many new
blockbusters, are entering the generics markets in a big way.
Unilab officials suggested that because of the public debate
surrounding the Act, both industry and lawmakers have increased
awareness of the importance of patents and trademarks to the
pharmaceutical industry.

TRIPS Issues Remain
-------------------

8. (SBU) Post continued its intensive engagement on the Act during
the preparation of the implementing rules. Mission officials
observed the public consultations that were held in Manila, and met
separately with the Director General of the Intellectual Property
Office, the Secretary of Trade and Industry, and representatives of
the Department of Health. USTR supplied an analysis of initial
drafts of the regulations, which we conveyed to our contacts.
Unfortunately, several USG concerns were not ultimately addressed,
including apparent TRIPS violations in both the Act and the rules in
the provisions on compulsory licensing.

Comment: Minimizing Damage
--------------------------
9. (SBU) Our contacts in both the Legislative and Executive
Branches have consistently maintained that they interpret the
Philippine legislation as allowing full TRIPS compliance. We will
monitor the implementation and lobby the GRP to implement the law in
ways which respect TRIPS and the interests of U.S. companies.

KENNEY

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