TRADE-ARGENTINA/US: New Worries Over Patent Law

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Feb 14 2000 (IPS) - US Secretary of Commerce William Daley’s visit to Argentina this week will tackle a central point on the bilateral agenda: the question of a patent law, nearly the only prickly issue in relations between the two countries, but one that has dragged on for decades.

In the 1990s, then-president Carlos Menem promoted what he described as a “strategic alliance” with the United States, giving virtually automatic support to that country’s foreign policy initiatives.

But patents remained a source of tension.

Menem attempted to favour US proposals regarding patents. But Congress – even legislators from the then-ruling Justice (Peronist) Party – stood firm in defence of local laboratories, which copy formulas and sell the resultant pharmaceutical products under new names.

When he reaches Argentina Wednesday, Daley will demand that the government of President Fernando de la Rúa ensure that a controversial bill approved in 1995 go into effect as scheduled, after the waiting period expires in November, and that none of the deferments or amendments under debate in Congress be accepted.

Officials from both countries admit that Argentina’s lack of a law recognising the intellectual property rights of patent-holding drug companies is a long-standing problem that at times has caused a strain in relations between the two countries.

And despite the passage of the new law, uncertainty and friction remain. Last week, Argentine Foreign Minister Adalberto Rodriguez Giavarini had to promise his US counterpart, Secretary of State Madeleine Albright, that the law would go into effect as it stood.

The latest fears were triggered by an initiative by ruling coalition and opposition lawmakers in the lower house of the Argentine Congress to obtain another five-year grace period before local laboratories must begin to pay royalties to foreign patent- holders.

The president of the committee on industry of the lower house of Congress pledged Monday that another five-year deferment would not be accepted. But, he argued, local industry must somehow be protected from competition it is not ready to face.

One of the possibilities being studied is a requirement that foreign labs manufacture their products in the country rather than importing them as finished products as permitted by the law as it now stands.

The three most developed pharmaceutical industries in Latin America are those of Argentina, Brazil and Mexico, which do a combined annual turnover of around eight billion dollars. But both Brazil and Mexico – as well as Chile – already have patent laws in place.

Drug companies in Argentina alone sell around four billion dollars a year in medicines. Local manufacturers have a corner on 55 percent of the national market. The pharmaceutical sector, both local and foreign companies, provide jobs to around 35,000 people.

Lawmakers from the centre-left ruling Frepaso coalition as well as the opposition see the matter as a touchy one, because once the new law is enacted many national laboratories could be forced to close down, while foreign firms would limit their role to simply importing medicine produced by the parent company.

Nevertheless, the continued operation of local firms has provided no guarantee of low prices. On the contrary, Argentina is one of the 12 countries in the world that spend the most money on medicine, according to a study carried out by the non-governmental organisation Isalud.

Isalud chairman Dr. Ginés González García, a former health minister, said prices are high because of the pressure exercised by both local and foreign drug companies to get doctors to prescribe brandname, rather than generic, products even though the law establishes the contrary.

The law approved by Congress in 1995 actually set in place an eight-year transitional phase before the law was to fully enter into effect, in order to give local laboratories time to prepare themselves. It also stipulated that foreign firms were to manufacture their products locally.

But Menem vetoed both clauses, and ordered that the law be put immediately into effect, as demanded by foreign firms.

The legislators, however, in open defiance against a president accustomed to imposing his views at least on his party’s lawmakers, ratified the law in its original form.

Nonetheless, in the face of the president’s insistence, the Foreign Ministry’s warnings about the danger of trade sanctions, and lobbying by the foreign drug companies, the law was amended. The waiting period was cut to five years, and the requirement that companies produce locally was removed.

But no one was completely satisfied by the changes. Local companies saw them as a setback, while foreign firms were still upset about the grace period. Then-US secretary of commerce Mickey Kantor criticised the law as unacceptable.

But now that the timeframe has run out, his successor, Daley, is demanding that the once heavily criticised law be put into effect in November, as scheduled.

Fears now are focusing on the possibility of Congress extending the waiting period once again, based on World Trade Organisation standards that stipulate that developing countries can opt for an up to 10-year transitional period before putting patent laws into effect.

Representatives of leading drug companies travelling with Daley this week will meet with the president of the House of Representatives, Rafael Pascual. Daley himself may even take part in the meeting.

The discussions will focus on the demand put forth by lawmakers that pharmaceutical companies produce locally in order to avoid what happened in Chile, where a few months after a patent law was enacted, the transnational corporations Phfizer, Bayer and Schering closed down their factories.

The representatives of foreign firms will attempt to block any further amendment of the law.