VZCZCXRO8172
PP RUEHAG RUEHAP RUEHDE RUEHDF RUEHGI RUEHHM RUEHLZ RUEHMA RUEHMR
RUEHPA RUEHPB RUEHRN
DE RUEHRH #2139/01 2971454
ZNR UUUUU ZZH
P 241454Z OCT 07
FM AMEMBASSY RIYADH
TO RUEHC/SECSTATE WASHDC PRIORITY 6792
INFO RUCNWTO/WORLD TRADE ORGANIZATION COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 RIYADH 002139 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USTR FOR JASON BUNTIN 
USDOC FOR TYLER HOFFMAN 
 
E.O. 12958: N/A 
TAGS: ETRD EINV KIPR SA
SUBJECT: SAUDI ARABIA PHRMA ISSUES: REQUEST FOR GUIDANCE 
 
REF: A. RIYADH 1346 
     ¶B. RIYADH 1347 
 
¶1.  This is an action request for EEB/TPP/BTA, USDOC and 
USTR.  Please see paragraph 9. 
 
¶2.  (SBU)  Summary.  Multinational pharmaceutical companies 
are vigorously lobbying Post, the Department, USDOC and USTR 
for high-level USG involvement in two ongoing issues 
impacting their interests in Saudi Arabia.  Over the last 
year, the government of Saudi Arabia has cut prices for 
pharmaceutical products sold in the Kingdom, and removed 
patent protection for an unknown number of pharmaceutical 
products during the country's transition to a new 
TRIPS-compliant patent law in 2004 (reftel A, B).  Affected 
pharmaceutical companies argue that the SAG's actions violate 
its WTO obligations.  Post requests (a) USTR's guidance on 
whether the SAG is in violation of its WTO obligations as 
alleged by industry, and (b) the Department's guidance as to 
appropriate USG intervention, if any, in these issues. 
Industry is likely to raise these issues during the upcoming 
visit of Assistant US Trade Representative Donnelly, making 
clarification of the USG position especially timely.  End 
Summary. 
 
------------------------------- 
MOH Announces Price Cuts 
To Take Effect During Ramadan 
------------------------------- 
 
¶3.  (SBU)  In October 2006, the Saudi Arabian Ministry of 
Health (MOH) stated its intention to reduce pharmaceutical 
prices in the Kingdom by 1 percent for each year a product 
has been on the market.  On September 11, 2007, the MOH 
released an additional statement saying that it would 
announce price cuts on more than 6,000 medicines during the 
September-October period of Ramadan.  (Note: The price cuts 
have not yet gone into effect, but industry contacts expect 
them to be announced on October 30.  End note.)  According to 
industry representatives in Riyadh, the SAG proposes to 
except only products that cost less than SR20 (US$5.33) or 
those which were registered in the last five years (up from 
an initial proposal of two years) from the 1 percent per year 
price reduction policy. 
 
------------------------------------------ 
Industry Claims MOH Refuses Consultations 
------------------------------------------ 
 
¶4.  (SBU)  In a meeting with Emboffs on September 11, 
industry representatives expressed deep frustration with the 
MOH's refusal to consult with them regarding this proposed 
pricing mechanism.  They state the SAG has granted them only 
one meeting on this issue.  During this late June meeting 
with Ali Zawawi, General Director of Medical and 
Pharmaceutical Licenses at the MOH, the industry 
representatives stated their concerns were not heard and 
their questions were not answered.  They further assert that 
the SAG would violate its WTO obligations if it implemented 
this pricing mechanism without formally issuing a written 
explanation of the mechanism and allowing 60 days for public 
comment.  The representatives requested that the USG 
intervene to stop the SAG from implementing this pricing 
mechanism and to convince it to engage with industry. 
 
¶5.  (SBU)  The Ambassadors of the European Union, Switzerland 
and Belgium to Saudi Arabia met with the Minister of Health 
regarding the proposed pricing mechanism on September 26. 
According to industry contacts, the Minister acknowledged 
that it is in the long-term interests of Saudi Arabia to 
consult with European pharmaceutical companies regarding 
pricing.  He stated that the MOH would not implement a new 
pricing mechanism without consulting with industry and that 
the MOH would meet with industry representatives in the 
coming month.  Those representatives report that no such 
meetings have occurred. 
 
------------------------- 
Loss of Patent Protection 
------------------------- 
 
¶6.  (SBU)  An unknown number of pharmaceutical products lost 
patent protection when Saudi Arabia transitioned to a new 
TRIPS-compliant patent law in 2004.  Products that had 
applications for patents pending under the old law (and 
enjoyed patent protection while their applications were 
pending) were reviewed as new cases under the new law. 
According to Dr. Khalid Alakeel, Director General of 
 
RIYADH 00002139  002 OF 002 
 
 
Industrial Property at the King Abdulaziz City for Science & 
Technology (KACST), these products were then denied patents 
because the SAG determined that they were not "novel" because 
they had been publicly patented in other jurisdictions more 
than a year before their cases were considered in Saudi 
Arabia.  USTR proposed that the SAG grant temporary exclusive 
marketing rights to pharmaceutical products in this category. 
 The SAG asked for a list of these products, but industry was 
reluctant to provide a definitive list for fear of 
inadvertently omitting a product.  Fawaz al-Alamy, Advisor to 
the Minister of Commerce and Information, suggested to Paul 
Burkhead (former Director for European and Middle Eastern 
Trade Affairs at USTR) on June 4, 2007, that industry at 
least provide a list of examples to give the SAG an idea of 
the extent of the problem.  Industry has not yet provided any 
list to the SAG, though Post understands that such a list is 
now in the final stages of compilation. 
 
 
¶7.  (SBU)  The September 11 MOH statement also stated the 
price of Lipitor had been reduced from SR140 (US$37.33) to 
SR76 (US$20.26).  MOH has licensed a local manufacturer to 
produce a generic version of Lipitor, effectively cutting the 
drug's price.  To Post's knowledge, Lipitor is the first 
pharmaceutical to lose patent protection under the process 
outlined above, for which the MOH has subsequently licensed 
manufacture of a generic equivalent.  Pfizer, Lipitor's 
manufacturer, is appealing the decision to deny Lipitor a 
patent, and argues that MOH's issuance of a license to 
manufacture generic Lipitor violates Saudi Arabia's WTO 
obligations.  Pfizer states that under Saudi Arabia's 
Protocol of Access to the WTO, the Saudi Arabian 
representative stated that if a pharmaceutical patent 
application was pending with KACST, the MOH would not 
register a generic, unless there was no possibility that the 
patent would be granted. 
 
¶8.  (SBU)  During an October 24 meeting with Emboff, Alakeel 
acknowledged that Pfizer is in the process of appealing 
Lipitor's rejected application.  He further agreed in 
principle that a license to produce a generic version of a 
pharmaceutical should not be issued while the patent 
rejection of that precise pharmaceutical is being appealed. 
However, he explained that pharmaceuticals can be patented in 
five different ways (e.g. each of the drug's different 
physical forms and the process of making the drug) and Pfizer 
had only applied to patent Lipitor in three of those ways, so 
it is possible that Pfizer did not apply to patent the form 
of Lipitor for which the MOH issued a generic license. 
Alakeel said he was not aware of whether this was in fact the 
case.  He also reiterated that the SAG was willing to explore 
a solution for the pharmaceutical products that lost patent 
protection, but stated that such a process would not progress 
until industry provides a list of affected products to the 
SAG. 
 
-------------------- 
Request for Guidance 
-------------------- 
 
¶9.  Action Request:  AUSTR Shaun Donnelly has proposed to 
visit Riyadh in early 2008.  Industry will likely take the 
visit as an opportunity to further press their agenda; these 
issues may also come up during AUSTR Donnelly's official 
meetings.  Post therefore recommends clarifying a 
comprehensive USG response prior to his visit.  Post requests 
that USTR clarify its views on possible WTO violations 
alleged by industry, as described above.  Post also requests 
instructions from EEB/TPP/BTA, Commerce and USTR and 
regarding how and to what extent we should advocate on behalf 
of the US pharmaceutical industry on these issues. 
FRAKER