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PP RUEHCN RUEHGH RUEHVC
DE RUEHIN #2498/01 3230734
ZNR UUUUU ZZH
P 190734Z NOV 07 ZDS
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC PRIORITY 7399
INFO RUEHOO/CHINA POSTS COLLECTIVE
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UNCLAS SECTION 01 OF 03 TAIPEI 002498 
 
SIPDIS 
 
C O R R E C T E D  C O P Y (ADD SENSITIVE CAPTION) 
 
STATE PLEASE PASS TO AIT/W AND EAP/RSP/TC 
 
STATE PASS USTR/DAVID KATZ AND CHRIS WILSON 
 
USDOC FOR 4430/ITA/MAC 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ETRD ECON KIPR TW
SUBJECT: Taiwan Pharma: Patent Linkage Going Nowhere 
 
 
TAIPEI 00002498  001.2 OF 003 
 
 
Reftel: Taipei 1788 
 
Summary 
-------- 
 
¶1. (SBU) Taiwan lacks a patent-linkage notification requirement and 
allows generic-drug licensing before patent expiry, practices that 
foreign pharmaceutical manufacturers claim allow local generic drug 
makers to infringe on patent-holders' rights and, in some cases, 
result in the Bureau of National Health Insurance (BNHI) reimbursing 
pharmacies at an unfairly-high rate for generic drugs.  The U.S. and 
the Taipei American Chamber of Commerce have pushed the Taiwan 
authorities to implement a U.S.-style patent-linkage system that 
would continue to allow generic-drug testing before the original 
drug's patent expiration, but would define a time period before 
which generic-drug manufacturers cannot use patented data for 
research or production trials; would enforce a "data-exclusivity" 
period before which generics cannot use safety and efficacy data 
provided by patent-holders to regulatory agencies; would require 
generic-drug manufacturers to notify patent-holders before using the 
patent-holder's intellectual property for research or trials; and 
would prevent generic-drug makers from licensing a generic form of a 
patented drug and getting a reimbursement price while the original 
patent is still valid.  However, the authorities responsible for 
drafting amendments to Taiwan's laws to implement patent linkage do 
not see a need for such a system in Taiwan and believe that the 
Taiwan judicial system is adequate for protecting original-drug 
manufacturers' IPR.  Therefore, progress toward this reform would 
require sustained U.S. engagement with Taiwan authorities.  End 
summary. 
 
Patent Linkage: What is it? 
--------------------------- 
 
¶2. (U) Patent linkage is a regulatory system whereby patent-holders 
register pharmaceutical patents with a responsible agency 
that--after a set period has passed--allows generic makers to use 
the patented information for research and clinical trials as long as 
the generic-drug maker notifies the patent-holder.  Patent-linkage 
systems also protect--again for a set period of time--the safety and 
efficacy data that original-drug manufacturers provide to regulators 
when the new drug is being considered for approval, the so-called 
"data-exclusivity" period.  Under a patent-linkage system, the 
responsible agency will not allow a generic-drug maker to begin 
marketing or selling a knock-off drug until the original patent and 
data-exclusivity period have both expired, or a responsible 
government body rules that the patents have not been infringed upon 
or are invalid. 
 
¶3. (U) In the United States, the responsible agency is the Food and 
Drug Administration (FDA), which, in consultation with the Patent 
and Trade Office (USPTO), compiles pharmaceutical patents and 
information on the patent-holders in its "Orange Book." When a 
generic manufacturer begins research or clinical trials using drugs 
or processes that have been patented in the United States and 
included in the Orange Book, U.S. law requires the manufacturer to 
notify the patent-holder.  This notification system allows 
patent-holders to ensure that generic makers are respecting 
intellectual property rights and do not use patented information to 
bring a knock-off drug to market before the original patent and 
data-exclusivity periods expire. 
 
How Would Taiwan Implement It? 
------------------------------- 
 
¶4. (U) If Taiwan wanted to adopt a U.S.-style patent-linkage system 
for protecting pharmaceutical patents, the Taiwan Intellectual 
Property Office (TIPO) would submit an amendment to Patent Act 
Article 57 to the Executive Yuan for approval and submission to the 
Legislative Yuan, and the Department of Health (DOH) would do the 
same to Article 40 of the Pharmaceutical Affairs Law.  The 
amendments would allow companies intending to register a generic 
version of a drug with BNHI to use the patented information to 
conduct research and trials, but would not allow the generic maker 
to register the knock-off drug before the expiry of the original 
drug's patent term without the patent holder's consent.  The 
amendment would also designate an official "competent authority" 
with oversight of the patent-linkage system to notify the 
patent-holder and holder of the license for the original drug of the 
same ingredients, so that they would be able to monitor any 
potential violations of their patent or license. 
 
Why Does Taiwan Need It? 
------------------------ 
 
 
TAIPEI 00002498  002.2 OF 003 
 
 
¶5. (U) Taiwan does not have an original-drug industry, and foreign 
drug-makers claim that Taiwan's pharmaceutical laws often favor the 
island's large off-patent drug-manufacturing sector.  For example, 
although Taiwan law does not allow pharmaceutical companies to sell 
a generic drug until the original drug's patent has expired, the DOH 
does allow generic makers to use patented information to produce 
drugs for clinical trials and other pre-production research and then 
apply for a license for the generic before the expiration of the 
original drug's patents.  With the license, the knock-off 
manufacturer can then apply for a reimbursement price from the 
Bureau of National Health Insurance (BNHI), a price that will not be 
re-evaluated by subsequent BNHI price-volume surveys (PVS) until 
after the drug comes onto the market. 
 
¶6. (SBU) Original manufacturers claim that this often gives a 
generic manufacturer an unfairly high price vis-a-vis the original 
drug during the time between the expiry of the original patent and 
the subsequent price-reduction on the generic drug by the next BNHI 
drug price-volume survey (PVS). [Please see reftel for an overview 
of the PVS system.  End note.] For example, the patent for the 
Pfizer product Lipitor will not expire until 2016, but one generic 
manufacturer has already secured a production license and BNHI 
reimbursement price on a knock-off version. In another case, before 
the patent on Pfizer's anti-hypertension drug Norvasc expired in 
March 2007, 17 local generic-drug manufacturers had--unknown to 
Pfizer--already used the company's IPR to produce, register, and 
receive BNHI prices for generic versions.   A U.S.-style 
patent-linkage system would not allow a generic to be licensed until 
the original drug's patent expires, thus eliminating this "loophole" 
in Taiwan's current drug-pricing system. 
 
¶7. (SBU) Patent linkage would also benefit original-drug 
manufacturers by ensuring that generic-drug manufacturers 
automatically notify original makers as the generic makers start 
research on and begin filing applications for marketing 
authorization of a knock-off drug. Foreign makers claim that the 
current lack of such notification allows local manufacturers to use 
patented information to research, produce, and, in some cases, bring 
to market drugs that are based on an original makers' intellectual 
property, all without the patent-holder's consent or knowledge.  In 
addition to the Pfizer case above, original-drug manufacturers point 
to several ongoing legal cases in which BNHI mistakenly allowed a 
generic drug to come to market before the patent it was based on 
expired.  The patent on the Bristol-Myers Squibb (BMS) drug Plavix 
will expire in 2018, but BMS claims that three generics that use the 
company's intellectual property are already on the market.  [Note: 
Plavix's patent-holder is a French company, but BMS has a license to 
produce it in Taiwan. End note.]  Eli Lilly claims that Taiwan's 
Tungyang Chemical Industries Company illegally used an Eli Lilly 
process patent to bring a drug to market in 2003, and has been 
fighting an expensive legal battle with Tungyang in the Taiwan 
courts for over four years. 
 
¶8. (SBU) These U.S. companies told us that a U.S.-style 
patent-linkage system would have notified them of these IPR 
infringements early enough to take action against the local 
companies, and would also have prevented the generics from reaching 
the market until after the expiry of the original patents. Although 
these companies are not able to estimate for us how much Taiwan's 
lack of such a system has cost them, the International 
Research-based Pharmaceutical Manufactures Association (IRPMA), 
foreign drug-makers' industry group in Taiwan, recently asked its 
members to calculate the number of each member company's drugs that 
would have benefited from having patent linkage in Taiwan, as well 
as the estimated losses each company has suffered as a result. 
 
BOPA, TIPO, BNHI Don't Want to Bother 
------------------------------------- 
 
¶9. (SBU) Econoff met recently with Dr. Chi-chou Liao BOPA's Director 
General for Pharmaceutical Affairs, to discuss BOPA's view of patent 
linkage.  Dr. Liao believes that a U.S.-style patent-linkage would 
be overly-complicated and would require a high level of patent 
knowledge on the part of the Taiwan authorities that the island 
simply doesn't have.  Dr. Liao told us that BOPA is also concerned 
that BOPA would face lawsuits for any mistakes or misconduct that 
the Bureau or its officials might make in compiling an Orange Book, 
going through notification procedures, or ensuring enforcement of 
the patent-linkage mechanism. 
 
¶10. (SBU) Dr. Liao told econoff that instead of creating such a 
complicated system to enhance IPR protection, Taiwan would be better 
off simply ensuring that Taiwan's Intellectual Property (IP) 
Court--which will begin hearing cases in July 2008--has prosecutors 
and judges with enough pharmaceutical expertise to properly handle 
 
TAIPEI 00002498  003.2 OF 003 
 
 
patent-infringement disputes using current Taiwan laws. [Note: On 
November 9, econoff talked briefly with two local, U.S.-trained 
lawyers who recently completed a report to BOPA on patent-linkage 
systems used outside of Taiwan.  While the two would not reveal the 
report's conclusions, they hinted that the report does not recommend 
that Taiwan adopt a patent-linkage system due to its complexity. End 
note.] 
 
¶11. (SBU) TIPO's Secretary General, Margaret Chen, recently told 
econoff that her organization does not want to create an "Orange 
Book" of pharmaceutical patents.  She said that although TIPO would 
assist in compiling such a patent book if directed by the EY, the 
Office is not considering this move and does not think that Taiwan 
needs a patent-linkage system.  TIPO echoed BOPA's belief that the 
Taiwan judicial system is adequate for protecting original-drug 
manufacturers' IPR. 
 
¶12. (SBU) Cheng-hua Lee, Vice President and CIO of Taiwan's Bureau 
of National Health Insurance (BNHI), recently told econoff that 
BNHI, too, does not see the need for a patent-linkage system in 
Taiwan. He echoed Dr. Liao's belief that implementing patent linkage 
would require too high a level of patent knowledge on the part of 
the Taiwan authorities.  He added that only one current patent 
dispute case in Taiwan would have benefited from the protections of 
a U.S.-style patent-linkage system, and that BNHI's actions to alert 
hospitals and pharmacies of the resulting patent-dispute case is 
adequate to protect the original manufacturer's property rights 
pending a ruling from Taiwan's court system on the case. 
 
Comment 
------- 
 
¶13. (SBU) BOPA, BNHI, and TIPO are the three offices in Taiwan 
responsible for implementing pharmaceutical-related policy, and none 
of the three supports the creation of a patent-linkage system as 
advocated by foreign original-drug manufacturers.  Therefore, 
progress toward this reform would require sustained U.S. engagement 
with Taiwan authorities. We may want to emphasize to the Taiwan 
authorities that a patent-linkage system would help local companies 
understand an original patent's status before starting an expensive 
drug-development program; would ensure that Taiwan's regulatory 
agencies have the right information to fairly evaluate patent use; 
would save judicial resources of the new Intellectual Property Court 
by minimizing lengthy and complex patent disputes; and would help 
foster a stable and legally-friendly environment for international 
drug manufacturers as they consider both where to introduce new 
products and where to spend their drug-development dollars. End 
comment.