VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0750/01 1082057
ZNR UUUUU ZZH
R 182057Z APR 07
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 7890
RUCPDOC/USDOC WASHINGTON DC
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUEHAC/AMEMBASSY ASUNCION 6107
RUEHCV/AMEMBASSY CARACAS 1192
RUEHMN/AMEMBASSY MONTEVIDEO 6365
RUEHSG/AMEMBASSY SANTIAGO 0347
RUEHBR/AMEMBASSY BRASILIA 5962
RUEHGT/AMEMBASSY GUATEMALA 0183
RUEHLP/AMEMBASSY LA PAZ APR VILNIUS 0023
RUEHSO/AMCONSUL SAO PAULO 3250
RUEHRI/AMCONSUL RIO DE JANEIRO 2192

UNCLAS BUENOS AIRES 000750 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER 
STATE FOR WHA/BSC AND WHA/EPSC 
E FOR THOMAS PIERCE 
EB/CBA FOR FMERMOUD, DENNIS WINSTEAD 
PASS NSC FOR JOSE CARDENAS 
PASS USTR FOR EEISSENSTAT, SCRONIN 
US SOUTHCOM FOR POLAD 
 
E.O. 12958: N/A 
TAGS: ECON EINV KIPR AR
SUBJECT: AMBASSADOR'S ROUNDTABLE WITH U.S. PHARMACEUTICALS 
 
Ref:  Buenos Aires 335 
 
¶1. (U) The following cable contains business-confidential 
information and should not be distributed via internet. 
 
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SUMMARY 
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¶2. (SBU) Ambassador hosted a roundtable for U.S.-based 
pharmaceutical firms doing business in Argentina, including Pfizer; 
Merck, Sharp & Dohme; Bristol-Myers Squibb; Eli Lilly; 
Janssen-Cilag; Cardinal Health; Baxter; Abbott; Valeant; and Alcon. 
Company reps noted that, while their profit margins are being 
squeezed by heavy-handed government price controls and increasing 
labor costs, Argentina's pharmaceutical sector sales are growing at 
double digit rates.  They cited flaws in Argentina's patent 
protection system including slow issuance of patents, poor linkage 
between the GoA entity approving patents and Health Ministry 
approval to market generic copies, and a weak legal process to fight 
patent infringement.  Foreign-owned pharmaceuticals have sold off 
the bulk of their Argentine manufacturing operations over the past 
decade.  However, their clinical pharmaceutical research has grown 
rapidly to take advantage of Argentina's highly educated workforce, 
relatively low costs, and speed of getting products into the 
clinical research pipeline.  Companies appreciated the Ambassador's 
offer to advocate for improved patent protection.  They argued that 
the best means to this end is to highlight the high-skilled and 
high-wage clinical research jobs U.S. pharmaceutical players provide 
-- the kind of jobs that speaks to Argentina's competitive advantage 
in higher education and the kind of jobs whose growth is directly 
tied to improved IP protection.  End Summary. 
 
--------------------------------------------- - 
ARGENTINA: GETTING BETTER ALL THE TIME, BUT... 
--------------------------------------------- - 
 
¶3. (SBU) On April 10, Ambassador hosted a roundtable with Argentine 
country managers of U.S.-based pharmaceutical companies including 
representatives of Pfizer; Merck, Sharp & Dohme; Bristol-Myers 
Squibb; Eli Lilly; Janssen-Cilag; Cardinal Health; Baxter; Abbott; 
Valeant; and Alcon attended.  (Note: Allergan, Bausch & Lomb, 
Schering-Plough, Wyeth and 3M were invited, but unable to attend. 
End Note)  The Director of the research-based pharmaceutical 
chamber, CAEME (Argentine Chamber of Medicinal Specialties), which 
represnts the bulk of foreign firms operating here, also attended. 
 
¶4. (SBU) Company reps agreed that, while margins are being squeezed 
due to heavy-handed government price controls and increasing labor 
costs, Argentina's pharmaceutical sector revenues continue to grow 
at double digit rates, in line with the nation's 5-year strong 
economic recovery.  The market share of foreign-based firms has 
remained at roughly the 50% level, one of the lowest market shares 
in all of Latin America, due to GoA policies that favor local 
generic players who exploit weaknesses in Argentine intellectual 
property legislation and enforcement.  While Argentina's current 
intellectual property (IP) regime is weak in several areas, they 
agreed that it is not significantly worse than IP regimes of 
neighboring Southern Cone countries. 
 
¶5. (SBU) Flaws in Argentina's patent protection system include the 
slow issuance of patents, a lack of linkage between outstanding 
patents or patent applications and Health Ministry marketing 
approval of generic copies, and the legal process to fight patent 
infringement.  However, there was general agreement that the most 
significant problem facing foreign pharmaceutical companies is the 
lack of data protection.  In the current system, as the Abbott 
manager noted, companies which pirate medicines only need to present 
copies of marketing approval from another country (such as the 
 
 
information available on the FDA website) as evidence of the safety 
and efficacy of their copied medications.  (Note: According to the 
Director of ANMAT - the National Administration of Medicines, Food 
and Medical Technology, the Argentine FDA equivalent - his agency is 
required by their norms to accept that information and grant market 
access accordingly.  End Note).  Abbott's Manager also noted that 
the copy-makers time their submissions to take advantage of 
advertising by the firm which invented the medicine. 
 
¶6. (SBU) Pfizer noted significant improvements in the review of 
patent applications, but noted that the average patent approval 
delay remains over five years.  Encouraging further improvements in 
GoA patent processing, Pfizer argued, is the single most important 
area that pharmaceutical companies -- and the U.S. Embassy -- should 
focus on given its potential impact on the bottom lines of U.S. 
investors in this sector.  Lilly cited their variable experience in 
winning court injunctions on patent infringement, including one 
battle which has been going on in court for two years with no 
success, while on ten other cases injunctions were easily obtained. 
The difference was that the ten cases were for molecule patents 
(which have only recently begun to be issued in Argentina) and the 
longstanding case depended on an older, process-based patent. 
 
¶7. (SBU) On the issue of "linkage" (making marketing approval 
granted by health authorities contingent upon a lack of conflicting 
patents or patent applications), the CAEME Director stated that 
requiring ANMAT to adopt the practice would take a presidential 
decree, and there was no political will to do so.  (Note: AMMAT's 
requirement to accept certain foreign health authority approval is 
based on a 1992 presidential decree. End Note). 
 
--------------------------------------------- --- 
CLINICAL RESEARCH - SUBSTITUTE FOR MANUFACTURING 
--------------------------------------------- --- 
 
¶8. (SBU) Company reps saw Argentina as a desirable place to conduct 
clinical research trials because of its highly educated workforce, 
relatively low costs, and speed of getting products into the 
clinical research pipeline.  CAEME noted that, in 2006, its members 
invested approximately $100 million in such trials, of which roughly 
$30-40 million came from U.S. firms.  CAEME firms hired 
approximately 5,000 clinical researchers in 2006, vs. 2,500 in 2003. 
 Pfizer and Merck both noted that, although Argentina's skilled 
labor was generally superior to that found in Brazil, they would 
prefer to do the same research in Brazil, since IPR protection is 
better there.  Bristol-Myers Squibb indicated that company 
headquarters would likely divert new research opportunities to other 
countries if Argentina's IPR regime did not improve.  There was 
broad agreement that U.S. pharmaceutical companies' investment in 
clinical research -- and the potential for additional investment -- 
offered them a point of leverage in encouraging the GoA to improve 
intellectual property protection. 
 
¶9. (SBU) However, Abbott commented that, in discussions with GoA 
officials, they were told that the GoA favored investment in 
domestic "brick and mortar" production over clinical research.  Many 
of the firms present, and other foreign-based pharmaceuticals, have 
sold their Argentine plants to local generic manufacturers in recent 
years.  CAEME noted that firms in the chamber used to have a total 
of 35 plants in Argentina, and now own just 10.  As a result, 
domestically owned Argentine pharmaceutical companies provide over 
70% of the sector's 15,000 direct jobs. 
 
------------------------------------------ 
ARGENTINE PHARMACEUTICAL SECTOR BACKGROUND 
------------------------------------------ 
 
¶10. (SBU) Argentina's market for prescription pharmaceuticals 
totaled $2.6 billion in 2006, and has grown fairly quickly (up 16% 
 
 
in 2004, 13% in 2005, and 12% in 2006).  Market share by 
foreign-owned firms in 2006, was about 48% a share that has remained 
fairly constant over the past five years.  Prior to the 2001/2 
economic crisis, foreign owned firms had a somewhat higher, though 
declining, market share.  Contacts have told us that Argentine 
domestic manufacturers hold the highest domestic market share in all 
of Latin America. 
 
¶11. (SBU) This high percentage of domestic generic sales is not/not 
due to more competitive pricing; multinational pharmaceutical firms 
note that generic prices are proportionally higher here than in 
other countries.  The high share can be attributed to the historic 
presence of a strong local generic industry and flaws in Argentina's 
IPR regime, including the ease with which illegitimate copy makers 
can gain health marketing approval.  It is also due to the influence 
of their strong lobby to protect the status quo, as well as the 
recent shift in ownership of production facilities.  Also, local 
firms have a solid reputation for quality, and are notably active at 
present (jointly with CAEME) in a campaign against "truchos" 
medicines (meaning "fake," but in the sense of trademark, not patent 
violations), some of which have contributed to serious health 
concerns. 
 
¶12. (SBU) Flaws in the GoA IPR regime have hit the Argentine 
research-based pharmaceutical industry particularly hard.  Despite 
fast-track procedures, difficulties in patent processing still 
result in long patent issuance delays, reducing the effective length 
of patent protection.  Additionally, the 2004 patent law (passed 
after GOA-USG negotiations) has slowed the injunctive relief process 
for some firms that have found their patents violated.  Under 
Argentine law, health regulators cannot consider the existence of 
any patent when making market approval decisions about a product 
(i.e., there is no linkage), but must accept as proof of safety and 
efficacy data belonging to the company that did the research. 
However, this information is often presented in Argentina by a 
company that wishes to market illegal copies, and accepting the data 
in such cases appears to violate the principle of "data 
confidentiality" found in TRIPS Article 39.3. 
 
SIPDIS 
 
---------------- 
Embassy Advocacy 
---------------- 
 
¶13. (SBU) The companies appreciated the Ambassador's offer to 
support them and work on their behalf with the GoA for expanded IP 
protection.  They said the best GoA person to approach would be 
Cabinet Chief Alberto Fernandez, an influential GoA insider.  While 
the Cabinet Chief does not have GoA line authority on IP issues, 
they consider the normal IP interlocutors from the Industry 
Secretariat in the Ministry of Economy to be wholly unsympathetic to 
 
SIPDIS 
foreign-based pharmaceutical company IP and pricing concerns. 
(Comment: Unfortunately, Fernandez is also one of the busiest GoA 
Ministers.) 
 
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COMMENT 
------- 
 
¶14. (SBU) Roundtable participants offered a candid, balanced 
assessment of the risks and rewards of doing business in Argentina's 
pharmaceutical sector.  They appreciated the Ambassador's offer of 
support, but made clear their doubt that either individual company 
or USG advocacy will have much impact on a GoA mindset that favors 
domestic capital, domestic production and large-scale employment 
generation.  Perhaps the best means to seek better intellectual 
property protection for U.S. company pharmaceutical products in 
Argentina is to highlight the high-skilled and high-wage clinical 
research jobs they provide -- the kind of employment that speaks to 
Argentina's competitive advantage in higher education and the kind 
 
 
 
of employment whose potential growth is linked to improved IP 
protection. 
 
WAYNE