A decade of disagreement between Israel and the US ended this month with the announcement by Minister of Industry, Trade and Labor Benjamin Ben-Eliezer of an agreement on intellectual property for pharmaceuticals.
The agreement ends the struggle, which included Israel's inclusion on the US Trade Representative's Priority Watch List of countries that violate intellectual property rights, accompanied by accusations that Israel deters international pharmaceutical companies and only cares about the interests of generic drug makers, beginning with Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA).
In general, the dispute concerned the exclusivity period granted by patents that innovative drug companies obtain for their drugs. They seek to extend the patents for their products for as long as possible, while generic pharmaceutical companies seek to shorten the exclusivity period by as much as possible, thereby opening the market to generic versions of brand drugs whose patents have expired. The deal was reached after Israel made concessions on both points.
On the first issue of information exclusivity, files submitted by innovative drug companies to the Ministry of Health will be classified for six and a half years, instead of five and a half years, with certain exceptions. Generic drug companies need access to these files to apply to develop generic versions of the drugs.
On the second issue, under the current situation the patent of a drug in Israel expires at the same time it expires in one of 21 countries. This will change, and the patent will now expire when it expires in one of six large countries. This agreement removed a major obstacle to Israel's joining the OECD.
A Ministry of Industry source naturally said that the agreement was a good one, and that everyone should be pleased by it. He anticipates no problem in passing the legislation on the agreement's principles. "The intention is to balance all the interests of the industry and the consumer," he said. "This is an argument that affected relations with the US, and this was a good time to end it."
So the Ministry of Industry is happy, but what about Israel's pharmaceutical industry? Israel is home to the world's largest generic pharmaceutical company - Teva. Other generic drug companies active in Israel Perrigo Company (Nasdaq:PRGO; TASE:PRGO), which acquired Agis several years ago, and Taro Pharmaceutical Industries Ltd. (Pink Sheets: TAROF).
How will the compromise affect them and the international drug companies with representatives in Israel? All in all, it seems that both side are satisfied by the agreement.
An industry source said, "We can definitely live with the agreements. The principles in Israel's 1998 law, which were renewed in 2005, were pretty much kept in the new agreement."
Israel's Patents Law (5727-1967) (amended 1998) is often called the "Teva law", basically implying who benefits.
There was concern that changes demanded by the US would result in generic drug companies moving production to other countries. Teva, for example, has dozens of plants around the world to which it could easily transfer production. The source said that the new agreement would "only marginally affect" production in Israel.
Another claim against giving in to US demands was the effect on Israeli consumers, since every extra year of information exclusivity costs NIS 150 million. On this point too, the source believes that the effect of the agreement will be marginal.
Pharma Israel represents 15 international pharmaceutical companies. Its secretary general, Guy Gorecki, welcomes the agreement, which he believes gives a proper balance. He says that he hopes that it will be turned into law soon.
"A drug takes 8-12 years to develop and costs $1-1.3 billion," says Gorecki. "The investment is huge and the risk is great, because only one in 5,000 molecules that enters the lab becomes a drug at the end of the process." He adds that Israel and elsewhere in the world understand the need to encourage the development of original drugs, and award marketing exclusivity periods so that the developers will make a return on their investment and have an incentive to develop more products.
"There is no argument about the importance of generics, which lower the price of drugs and increases access to them," says Gorecki. "On the other hand, without original development, there are no generics. The question is where the point of balance is. Our position was, firstly, that Israel was not in compliance with EU and US standards, and this agreement brings Israel to compliance with these countries."
Published by Globes [online], Israel business news - www.globes-online.com - on February 25, 2010
© Copyright of Globes Publisher Itonut (1983) Ltd. 2010