The Philippine Pharmaceutical Industry through “Rose-Colored Spectacles”: Cheap Medicines Act vis-à-vis the Intellectual Property Code

Introduction

The paper aims to illustrate how the Philippine legal framework is able to balance the government’s duty to promote health[1] and public welfare, with the constitutional[2] and statutory right of persons, whether natural or juridical, to intellectual property rights. In analysing the constitutional mandate, the paper will cover the pertinent provisions of both international and domestic legal system. The international law applicable would primarily pertain to the Agreement on Trade-Related Aspects of Intellectual Property Rights[3] (TRIPS). The author decided to consult with relevant laws and jurisprudence of other states and regional organizations that have persuasive effect to the Philippine legal system. The domestic laws to be examined include the Intellectual Property Code vis-à-vis the promulgated law on Access to Cheaper Medicine.

The paper is divided into five parts. The first part of the paper is about the pharmaceutical industry using the intellectual property law as framework of the discussion. This includes analysis of the dynamics of pharmaceutical companies with the laws on patent, compulsory licensing and parallel importation. The second part of the paper discusses the concept of the “Bolar Exemption.” This includes the introduction of the etymology of the term which traces its roots from American jurisprudence. This part of the paper will also present the international and regional bases of this exception. The next part of the paper will tackle the Access to Cheaper Medicine Act, a law supporting the exception of health as a more compelling interest over intellectual property rights. This law is labelled as the Philippine version of the Bolar Exemption. The fourth division shows the legal trend among other areas of law, where health and medical research are tagged as exceptions to the rule covered by the general provisions. The last part of the paper is the analysis and conclusion. This part will present a brief summary of the preceding divisions of the paper. The author opines that the higher level of importance accorded the public health over the intellectual property rights of the pharmaceutical industry should go beyond superficial legislation in order to meet the “public interest” ends and satisfy the due process requirement in the “deprivation” of constitutional right to property.

Pharmaceutical Products and Intellectual Property Law: Patenting, Compulsory Licensing and Parallel Importation

Patent

A patent is granted by the government to protect new and useful inventions. By virtue of this right, the patentee is able to exclude others from making, offering for sale, using or selling an invention.[4] The Intellectual Property Code of the Philippines, also known as Republic Act No. 8293 (R.A. 8293) includes “any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable”[5] as patentable. As a general rule, the patent of pharmaceutical products accords present rights to the patentee and deals with sustainability of the invention by making sure that the salient information will be used by the public after the expiration of the patent. As adapted by Pearl & Dean (Phil.), Incorporated v. Shoemart, Incorporated[6]:

The patent law has a three-fold purpose: "first, patent law seeks to foster and reward invention; second, it promotes disclosures of inventions to stimulate further innovation and to permit the public to practice the invention once the patent expires; third, the stringent requirements for patent protection seek to ensure that ideas in the public domain remain there for the free use of the public."[7]

Under Section 72 of the same Code, the law explains the limitations of patent rights on drugs and medicines after a drug or medicine has been introduced in the Philippines or anywhere else in the world by the patent owner, or by any party authorized to use the invention.[8] Application for patents are done through the Intellectual Property Office of the Philippines (IPO).The term of protection awarded the patentee is 20 years which accords the inventor pecuniary and commercial gain. The patent owner shares the full description of the invention and this data can be used for future research after the period of exclusive use expires.[9]

Compulsory Licensing

Certain flexibilities on the application of the stringent rules on intellectual property are recognized by international agreements. To give an example, the Doha declaration on TRIPS provides that member states are allowed to utilize compulsory license during health crises and emergency to supply sufficient medicine to the public.[10] Compulsory licensing is explicitly recognized by the Philippine IP Code. Compulsory license is a grant given by the government in favour of any person who has shown the capability to exploit the invention under certain circumstances.[11] One recognized circumstance is “public interest, in particular, national security, nutrition, health.”[12] Pursuant to the power of the government to pursue public interest, the legislative branch enacted Republic Act No. 9502, also known as the “Universally Accessible Cheaper and Quality Medicines Act of 2008.” This law will be more comprehensively discussed in the succeeding sections of this paper. It should be noted that as opposed to patents and parallel importation, the Philippine Supreme Court is yet to decide a case on compulsory licensing based on R.A. No. 9502.

Parallel Importation

            Parallel importation is also a relevant topic in the Philippine drug industry. According to Solid Triangle v. Sheriff of RTC QC, a parallel importer is “one which imports, distributes, and sells genuine products in the market, independently of an exclusive distributorship or agency agreement with the manufacturer.”[13] In the pharmaceutical industry, parallel importation involves the purchase of a patented drug from an approved source in an exporting country where it can be acquired more cheaply, without the consent of the patent holder in the importing country.[14] Parallel importation is supported by Article 31(5) of TRIPS which allows member states to enforce flexibilities in the enforcement of intellectual property rights when there is a national emergency or other circumstances of urgency. Parallel imports are also called grey-market imports. These imports do not involve the importation of counterfeit products or illegal copies.[15] As defined by the World Trade Organization (WTO), “These are products marketed by the patent owner (or trademark or copyright owner, etc) or with the patent owner’s permission in one country and imported into another country without the approval of the patent owner.”[16]

The Bolar Exemption

            The Bolar Exemption has its legal basis in Article 30 of TRIPS which provides the exceptions to rights conferred the patentees. The provision states, “Members may provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not reasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties.”[17] The Bolar Exemption, although may be characterized as a unilateral act of the government because it does not require the consent of the patentee, does not unjustly disregard the economic rights of the patent grantee. The exemption is about striking a convergence between the promotion of invention and the accessibility of cheaper medicine which is an important factor in sustaining a healthy population. The milestone achievement created by the Bolar Exemption is the allowance of acts of experimentation and research even before the expiration of the patent of a pharmaceutical product.[18]  In developing countries like the Philippines, this is a necessary government intervention to also protect the rights of majority of the Filipinos who normally would not have access to expensive medicinal products.

            In the international arena, both developed and developing states have acknowledged the importance of the Bolar Exemption for the promotion of human health and medical research. In a Government Response published by the Intellectual Property Office of the United Kingdom in 2013, the Government accepted that section 60(5) of the Patents Act of 1977 should accommodate the exemption from infringement, the activities involved in the preparation or running of clinical or field trials involving innovative drugs.[19] Furthermore, the Government Response opted for the inclusion of the activities involved in health technology assessment (HTA).[20] The state is on its way to developing amendments to the laws governing intellectual property on pharmaceutical products.

            The Bolar provision of the European Union is also known as Directive 2004/27/EC. This is the directive on the amendments on the Community Code relating to medicinal products for human use. By virtue of the directive, the rights granted to the patentee by virtue states’ laws on patents and utility model do not extend to trials and studies as defined by the directive. The directive is of extreme significance because prior to its enactment (before 19 November 2005), clinical studies and other relevant processes for the development and innovation of generic medicine could be tantamount to a patent infringement.[21] The directive is labelled as an upside to the manufacturers of generic drugs while also considered as downside from the perspective of the mainstream pharmaceutical companies.[22] The implementation of the Bolar provision in the European Union shows the support of the intergovernmental entity to the value of innovations that are not barred by technicalities governing patent laws.

            The application of the Bolar Exemption can have serious consequences to the mainstream pharmaceutical companies. In a press release created by Novartis, the corporation manifested its proactive cooperation to the exemption:

The manufacture, sale, use or importation of a patented product without permission by the patentee constitutes infringement in most countries. The “Safe Harbor exemption” is an exception to this rule. It is widely accepted that patents are an instrument to promote and not to hinder research activities. xxx Clinical trials for both generics and innovative medicines should be exempt in the interest of bringing new innovative and affordable medicines to the patients without any unreasonable delays due to patent protection.[23]

In another state, Pfizer, another international pharmaceutical company questioned the retroactivity of the Bolar Exemption.[24] The Supreme Court of Spain decided in favour of Spain and confirmed that the Bolar provision which was incorporated in Spanish laws in 2006 has a non-retroactive character. Therefore, prior to its enactment in 2006, the Bolar exemption did not exist in the Spanish jurisdiction.[25]

Universally Accessible, Cheaper and Quality Medicines Act of 2008

Based on studies, drugs in the Philippines are more expensive that drugs in other Asian countries of similar economic status. Because of this data, the government was impelled to institute the Cheaper Medicines Program through the Universally Accessible, Cheaper and Quality Medicines Act of 2008 which provided for the prominent legal bases for parallel importation[26] and improved production of generic drugs.[27] It cannot be avoided that because of the controversial amendments introduced by the law, the constitutionality of the provisions has been challenged by interested parties. The validity of the provision on parallel importation has been affirmed in the case of Roma Drug v. RTC of Guagua[28], which recognized the legality of grey importation as supported by the amendment to Section 72.1 of the Intellectual Property Code and the Implementing Rules[29] of R.A. No. 9502.

In the same manner, this law is instrumental in the allowance of research and laboratory trials even prior to the expiration of patent, pursuant to the regulations to be imposed by the government. The Bolar counterpart is found in Section 7 of  R.A. No. 9502 which provides an amendment to the IP Code.

72.4. In the case of drugs and medicines, where the act includes testing, using, making or selling the invention including any data related thereto, solely for purposes reasonably related to the development and submission of information and issuance of approvals by government regulatory agencies required under any law of the Philippines or of another country that regulates the manufacture, construction, use or sale of any product: Provided, That, in order to protect the data submitted by the original patent holder from unfair commercial use provided in Article 39.3 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), the Intellectual Property Office, in consultation with the appropriate government agencies, shall issue the appropriate rules and regulations necessary therein not later than one hundred twenty (120) days after the enactment of this law.[30]

R.A. No. 9502 also expressly amended the Generics Act of 1988. In a commentary from an Intellectual Property Law Firm[31], the commentator differentiated the Cheaper Medicines Act with the Generics Act:

The new law now allows local generic companies to start studying and testing generic equivalents of patented drugs before the expiration of the patent. This will also allow pharmaceutical companies to start the production and sale of a generic drug upon the patent. Under the old law, this preparation could only be done after the patent has expired. The whole process of obtaining approval for the drug, takes roughly about three years, effectively delaying the introduction of the generic in the market. In this manner, therefore, a patent-holder’s monopoly in local commerce over the drug, and any of its equivalents, were inadvertently extended by this period, outside the duration guaranteed the patent-holder by the law.[32] 

Medicine and Health as Exceptions: Other Areas of Law

Matters relating to medicine and research for the improvement of health condition are recognized exceptions among laws, not just on intellectual property but also on competition and privacy. The domestic and international laws and policies recognize the prime importance of health. The vital significance of the human person goes beyond the property rights of inventors and allows for the relaxation of strict rules on intellectual property when the public interest is at stake. This part of the paper will discuss the Data Privacy Act of 2012 and the ASEAN Regional Guidelines on Competition Policy – two areas that acknowledge the transcendental importance of human life as opposed to the inventor’s rights of pharmaceutical companies to privacy and market competition.

 Within the purview of the law on privacy, there are two primary uses of personal data within the pharmaceutical industry: biomedical research and pharmacovigilance. On the one hand, biomedical research recognizes that life-saving treatments available today were made possible by an environment that fostered medical research. Pharmaceutical companies collect patient health information created in controlled research settings.[33] On the other hand, pharmacovigilance is the science of activities relating to the detection, assessment, understanding and prevention of drug adverse effects or any other drug-related problem.[34] The Data Privacy Act recognizes that “it is the policy of the State to protect the fundamental human right of privacy, of communication while ensuring free flow of information to promote innovation and growth.”[35] The flow of ideas for the propagation of intellectual growth for public welfare should never be hampered. This is another field of law where disclosure is favored over secrecy in order to serve public interest.

Competition laws also provide for exceptions to pharmaceutical products and medical research. This further reiterates the importance of public health that should be given proper attention. Under Section 3.5.6 of the ASEAN Regional Guidelines on Competition Policy, “AMSs may use block exemptions xxx to exempt specific sectors and/or types of economic activities from the application of competition law. Examples of common industries or activities which may be granted block exemptions include research and development cooperation, and intellectual property rights contracts.”[36] The regional block of the Southeast Asian nations also recognize that exceptions to the competition policy can be made if based on public policy[37] grounds.

Analysis and Conclusion

            An analysis of the exceptions and exemptions granted by the Cheaper Medicines Act reaffirms the essential role that public health plays to achieve public welfare. Indeed, the legislation on the promotion of medical research and clinical trials even when there is an existing patent is primarily rooted on the desire to make pharmaceutical products more accessible to the public. In spite of the genuine communal benefit that is aimed to be achieved by the law, the words framed by the legislature should be fitted with the reality experienced by the consumers.  To give an illustration, surveys should be conducted in order to determine whether or not the implementation of the law is appropriate its objectives. Otherwise, the government intervention might be tantamount to lost revenues for mainstream pharmaceutical industries without reaping the benefits on the other end of the pole. The government is also bound to respect the property rights of pharmaceutical companies over their inventions. It is only when two conflicting interests need to be decided upon, that public health is given more weight.

As of press time, the use of generic medicine across the country may be prevalent but there are valid criticisms[38] that need to be addressed in order to ensure a more efficient implementation. The effectiveness of the provision on compulsory licensing as provided by the Cheaper Medicines Act is yet to be proven. The lack of sufficient basis to evaluate compulsory licensing can be attributed to the fact that the Philippines has not recently experienced health crisis that is sufficient for a compulsory license to be granted. Viewing the health condition and the need for accessible and cheaper medicine in the Philippine setting using the framework of the Cheaper Medicines Act and its amendment to the IP Code is akin to perceiving reality through “rose-colored spectacles.” On the one hand, there are times when the Philippine situation should be analysed with a naked eye. On the other hand, is the recognition that the government with its three branches, is capable of making the “rose-colored spectacles” more vibrantly red by ensuring that appropriate legislations are implemented effectively.

References

Primary Sources

1987 Philippine Constitution.

Data Privacy Act of 2012, R.A. No. 10173.

Intellectual Property Code of the Philippines, R.A. 8293.

Implementing Rules of R.A. No. 9502.

Rules and Regulations Implementing Republic Act No. 9711.

Association of Southeast Asian Nations. (2010).  ASEAN Regional Guidelines on Competition Policy.

Trade Related Aspects of Intellectual Property Rights (TRIPS).

Pearl Dean (Phil.), Incorporated v. Shoemart, Incorporated and North Edsa Marketing, Incorporated, 409 SCRA 231, August 15, 2003.

Solid Triangle v. Sheriff of RTC QC, G.R. No. 144309, November 23, 2011.

Roma Drug v. Regional Trial court of Guagua, G.R. No. 149907, April 16, 2009.

Secondary Sources

Ambrocio, K. (2009). The Bolar Exception: Roots and Introduction to the Philippine Patent System. Accessed on 8 October 2013 fromhttp://www.iplaw.ph/ip-views/The-Bolar-Exception-Introduction-Philippine-Patent-System.html.

Borchard, W. (2012). A Trademark is not a copyright or a patent. Cowan, Liebowitz & Latman, P.c., New York.

CMS. (2007). Bolar Provision and Regulatory Data Exclusivity in Europe. Accessed on 8 October 2013, from http://www.cms-cmck.com/Hubbard.FileSystem/files/Publication/3ed51f5e-7615-44dc-a399-076a7ccc3745/Presentation/PublicationAttachment/2a4563f5-b970-4fa2-9d61-0bac21c0b232/BolarProvisioninEU.pdf.

Cole, G. Exemption from Infringement: the EU Bolar Directive. IP Europe Quarterly. Accessed on 8 October 2013, from http://www.avidity-ip.com/assets/pdf/BolarJun12.pdf.

Gerharsen, T. (2006). Pfizer Fights IP Flexibilities in the Philippines. Accessed on 8 October 2013, from http://www.ip-watch.org/2006/04/30/pfizer-fights-ip-flexibilities-in-the-philippines/.

Intellectual Property Office. About Patents. Accessed on 8 October 2013, from http://www.ipophil.gov.ph/index.php/patents.

Intellectual Property Office of the United Kingdom. (2013). The Research and Bolar Exception: Proposals to exempt clinical and field trials using innovative drugs from patent infringement.

International Pharmaceutical Privacy Consortium, 6 March 2012.

Lovells, H. (2010). Spanish Supreme Court rules on Bolar and experimental research exemption. Accessed on 8 October from http://www.lexology.com/library/detail.aspx?g=20f5c6aa-fa61-47d1-b680-d632f76110ce.

Manthan, J. (2008). Patents Regime in India: Issues, challenges and opportunities in Pharmaceutical Sector. Vol. 7, Issue 1, Journal of Third World Medicine.

Novartis. (2011). Safe Harbor Exemption (Bolar Provision).

Ocampo, S. (2012). Cheaper medicines law hasn't served the poor. Accessed on 9 October 2013, from http://www.philstar.com/opinion/2012-06-09/815179/cheaper-medicines-law-hasnt-served-poor.

Picazo, O. Review of the Cheaper Medicines Program of the Philippines. Philippine Institute for Development Studies.

World Trade Organization. (2006). TRIPS Pharmaceutical Patents Obligations and Exceptions.

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[1] According to Section 11, Article XIII of the 1987 Constitution, “The state shall adopt an integrated and comprehensive approach to health development which shall endeavour to make essential goods, health and other social services available to all people at affordable cost.” Furthermore, Section 12 of the same Article provides, “The State shall establish and maintain an effective food and drug regulatory system and undertake appropriate health, manpower development, and research, responsive to the country’s health needs and problems.”

[2]  The Bill of Rights provides, “No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws.”

[3] The agreement which took effect on January 1, 1995, is an international agreement on intellectual property rights which covers member countries of the WTO.

[4] William Borchard. (2012). A Trademark is not a copyright or a patent. Cowan, Liebowitz & Latman, P.c., New York.

[5] Intellectual Property Code of the Philippines [INTELLECTUAL PROPERTY CODE], R.A. 8293, Section 21.

[6]  Pearl Dean (Phil.), Incorporated v. Shoemart, Incorporated and North Edsa Marketing, Incorporated, 409 SCRA 231, August 15, 2003.

[7] The case cites Aronson v. Quick Point Pencil Co.,  440 U.S. 257, 262 [1979], citing Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 [1994], cited Amador, patents, p, 496.

[8] Intellectual Property Code, Sec. 72.

[9]About Patents. Intellectual Property Office. Accessed on 8 October 2013, from http://www.ipophil.gov.ph/index.php/patents.

[10] Manthan, Janodia. (2008). Patents Regime in India: Issues, challenges and opportunities in Pharmaceutical Sector. Vol. 7, Issue 1, Journal of Third World Medicine.

[11] Intellectual Property Code, Sec. 93.

[12] Intellectual Property Code, Sec. 93.2.

[13] Solid Triangle v. Sheriff of RTC QC, G.R. No. 144309, November 23, 2011.

[14] Tove Gerharsen. (2006). Pfizer Fights IP Flexibilities in the Philippines. Accessed on 8 October 2013, from http://www.ip-watch.org/2006/04/30/pfizer-fights-ip-flexibilities-in-the-philippines/.

[15] World Trade Organization. (2006). TRIPS Pharmaceutical Patents Obligations and Exceptions.

[16] Id.

[17] Trade Related Aspects of Intellectual Property Rights [TRIPS], Art. 31.

[18] Manthan, Janodia. (2008). Patents Regime in India: Issues, challenges and opportunities in Pharmaceutical Sector. Vol. 7, Issue 1, Journal of Third World Medicine.

[19] Intellectual Property Office of the United Kingdom. (2013). The Research and Bolar Exception: Proposals to exempt clinical and field trials using innovative drugs from patent infringement.

[20] Id. 

[21] CMS. (2007). Bolar Provision and Regulatory Data Exclusivity in Europe. Accessed on 8 October 2013, from http://www.cms-cmck.com/Hubbard.FileSystem/files/Publication/3ed51f5e-7615-44dc-a399-076a7ccc3745/Presentation/PublicationAttachment/2a4563f5-b970-4fa2-9d61-0bac21c0b232/BolarProvisioninEU.pdf.

[22] Gwyn Cole. Exemption from Infringement: the EU Bolar Directive. IP Europe Quarterly. Accessed on 8 October 2013, from http://www.avidity-ip.com/assets/pdf/BolarJun12.pdf.

[23] Novartis. (2011). Safe Harbor Exemption (Bolar Provision).

[24] Hogan Lovells. (2010). Spanish Supreme Court rules on Bolar and experimental research exemption. Accessed on 8 October from http://www.lexology.com/library/detail.aspx?g=20f5c6aa-fa61-47d1-b680-d632f76110ce.

[25] Id.

[26] Under Section 7 of R.A. No. 9502, “72.1. Using a patented product which has been put on the market in the Philippines by the owner of the product, or with his express consent, insofar as such use is performed after that product has been so put on the said market: Provided, That, with regard to drugs and medicines, the limitation on patent rights shall apply after a drug or medicine has been introduced in the Philippines or anywhere else in the world by the patent owner, or  by  any  party  authorized  to  use  the  invention: Provided, further, That the right to import the drugs and medicines contemplated in this section shall be available to any government agency or any  private third party.”

[27] Oscar Picazo. Review of the Cheaper Medicines Program of the Philippines. Philippine Institute for Development Studies.

[28]  Roma Drug v. Regional Trial court of Guagua, G.R. No. 149907, April 16, 2009.

[29] The Implementing Rules of R.A. No. 9502 says, “Rule 9. Limitations on Patent Rights. The owner of a patent has no right to prevent third parties from performing, without his authorization, the acts referred to in Section 71 of the IP Code as enumerated hereunder: (i) Introduction in the Philippines or Anywhere Else in the World. Using a patented product which has been put on the market in the Philippines by the owner of the product, or with his express consent, insofar as such use is performed after that product has been so put on the said market: Provided, That, with regard to drugs and medicines, the limitation on patent rights shall apply after a drug or  medicine has been introduced in the Philippines or anywhere else in the world by the patent owner, or by any party authorized to use the invention: Provided, further, That the right to import the drugs and medicines contemplated in this section shall be available to any government agency or any private third party. (72.1) The drugs and medicines are deemed introduced when they have been sold or offered for sale anywhere else in the world. (n)”.

[30] Intellectual Property Code, Sec.7.

[31] Bengzon Negre Untalan (BNU) is a law firm focused ont he practice of intellectual property law in the Philippines.

[32] K.P. Ambrocio. (2009). The Bolar Exception: Roots and Introduction to the Philippine Patent System. Accessed on 8 October 2013 fromhttp://www.iplaw.ph/ip-views/The-Bolar-Exception-Introduction-Philippine-Patent-System.html.

[33] International Pharmaceutical Privacy Consortium, 6 March 2012.

[34] Rules and Regulations Implementing Republic Act No. 9711, Sec. 5 (ff).

[35] Data Privacy Act of 2012, R.A. No. 10173, Sec. 2.

[36] Association of Southeast Asian Nations. (2010). ASEAN Regional Guidelines on Competition Policy.

[37] Section 3.5.1.4 of the ASEAN Regional Guidelines on Competition Policy states that "Prohibitions may not apply to agreements or conduct based on specific public policy grounds."

[38] In an article by Satur Ocampo with the Philippine Star last June 9, 2012, he suggested a review in the implementation of R.A. No. 9502 because the it hasn't served the poor. The article is entitled "Cheaper medicines law hasn't served the poor" which can be accessed at http://www.philstar.com/opinion/2012-06-09/815179/cheaper-medicines-law-hasnt-served-poor.