Cablegate: Correa Promotes Local Pharmaceutical Production

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RR RUEHWEB

DE RUEHQT #0998/01 2862018
ZNR UUUUU ZZH
R 132016Z OCT 09
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 0184
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHBO/AMEMBASSY BOGOTA
RUEHBR/AMEMBASSY BRASILIA 0040
RUEHCV/AMEMBASSY CARACAS 0060
RUEHGL/AMCONSUL GUAYAQUIL
RUEHPE/AMEMBASSY LIMA 0066

UNCLAS QUITO 000998

SENSITIVE
SIPDIS
DEPT PLEASE PASS TO USTR FOR BENNETT HARMAN
DEPT FOR WHA/AND AND EB/TPP/IPE

E.O. 12958: N/A
TAGS: ETRD KIPR EIND EC
SUBJECT: CORREA PROMOTES LOCAL PHARMACEUTICAL PRODUCTION

1. SENSITIVE BUT UNCLASSIFIED

2. (SBU) Summary. The head of Ecuador's Intellectual Property
Institute (IEPI) denies the GoE intends to annul all pharmaceutical
patents, as public statements by President Correa on September 26
suggested. However, the government is undertaking a review of
pharmaceutical patents to consider issuance of compulsory licenses.
According to IEPI, the GoE plans to follow the legal process
established in the WTO Trade Related Intellectual Property Rights
Agreement (TRIPS) and Ecuador's national Intellectual Property Law.
U.S. NGO Essential Action is providing legal advice to the GoE
regarding compulsory licensing. Separately, the GoE is instituting
a two-tier system for government tenders for medicines, relegating
foreign suppliers to the second tier. End Summary.

3. (SBU) On October 1 and 8, Embassy staff met with local
representatives of U.S. pharmaceutical companies Pfizer, Merck
Sharp and Dohme, Schering-Plough, and Wyeth to discuss statements
made by President Correa during his weekly address on September 26.
During his address, Correa announced plans to establish a public
tender system for medicines that prioritizes local production, and
to eliminate pharmaceutical patents.

4. (U) Under the new public tender process, only national
pharmaceutical suppliers will be able to participate in an initial
bidding round. Should the government be unable to fulfill all of
its requirements through the initial bid, a second round will be
held in which foreign suppliers will be able to participate. This
new system will be a significant blow to U.S. pharmaceutical
companies, for whom sales to the public sector account for a
significant portion of domestic sector sales, in some cases
counting for close to 20 percent of local sales. In announcing the
change, President Correa said he was responding to requests for
support from local industry, which he said currently supplies only
22 % in volume and 13% in value of medicines sold in the domestic
market. Note, Ecuador is not a signatory to the WTO Agreement on
Government Procurement.

5. (SBU) Also troubling was President Correa's statement that he
planned to eliminate all "obligatory patents" within a week.
Correa said Ecuadorian law and international treaties allow Ecuador
to repeal patents for human health concerns, adding that all
medicines that can be produced and copied in Ecuador should be
domestically produced. These statements were consistent with a
vision Correa espoused in July: "Intellectual property is a
mechanism for development for the people. This is our vision of
intellectual property. It is not a mechanism to enrich the
pharmaceutical or agrochemical companies."

6. (SBU) In an October 7 meeting, the president of Ecuador's
Intellectual Property Rights Institute, Andres Ycaza, sought to
reassure SCO and ECONOFF that the GoE was not planning to annul all
pharmaceutical patents. Ycaza said he had been surprised by
Correa's statements as well, having received notice of them while
attending a World Intellectual Property Organization meeting in
Geneva. However, Ycaza said the GoE was conducting a review of all
pharmaceutical patents and does plan to issue compulsory licenses
to address problems of access to medicine, specifically referring
to cancer and HIV/AIDS treatments. In response to points raised by
SCO and Econoff that compulsory licensing typically is used for
emergency situations, permitted for only a specific time period and
pursued only after negotiations with patent holders, Ycaza
emphasized the GoE's intent to conduct the process in a manner
consistent with Ecuador's legal obligations under the WTO TRIPS
Agreement and Ecuador's Intellectual Property Law. He also
mentioned that Ecuador would be justified in issuing compulsory
licenses due to reasons of "public interest." Ycaza noted the need
to provide access to medicines that are prohibitively expensive,
mentioning a cancer drug that costs $6,000 per injection as an
example.

7. (SBU) While departing IEPI's offices, Embassy staff met Peter
Maybarduk, a representative of U.S. NGO Essential Action, who is
providing legal counsel to IEPI on compulsory licensing as part of
the NGO's Access to Medicines program. For its part, U.S. industry
is trying, through well placed contacts, to get a better idea of
President Correa's core objectives. Once it is clearer whether the
President's interests principally relate to access to medicine or
promotion of domestic industry, the companies intend to try to
develop a positive agenda they can present to the President as a
way of opening the door to a more collaborative relationship.
Embassy plans to consult with the Missions of other international
pharmaceutical companies (French, British, Swiss, German, Swedish)
and to continue seeking better definition of GoE intentions through
meetings at the Coordination Ministry for Production and the
Ministry of Health. At this point, Embassy interaction with the
GoE on the issue remains one of seeking information.

8. (SBU) Comment. Ycaza's focus on IPR is relatively narrow.
Although he may believe the GoE's plans are motivated purely by an
interest in providing better access to medicine, compulsory
licensing coupled with the government's new discriminatory public
tender process, President Correa's close personal relationship to
certain local pharmaceutical producers and his rhetoric suggest
that Correa's more fundamental agenda is promotion of the domestic
pharmaceutical industry. This would be consistent with the
emphasis Correa has been placing on national production across
industry lines (petroleum sector as an example) in the name of
Ecuadorian sovereignty.
HODGES

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