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C O N F I D E N T I A L QUITO 000075 
 
SIPDIS 
NOFORN 
 
E.O. 12958: DECL: 2020/02/10 
TAGS: ETRD KIPR EINV EC
SUBJECT: GOE REVIEWS INITIAL COMPULSORY LICENSE PETITIONS 
 
REF: 09 QUITO 998; 09 QUITO 1068 
 
CLASSIFIED BY: Heather Hodges, Ambassador, State, Exec; REASON: 
1.4(B), (D) 
 
¶1.   (C)   Summary.  Ecuador's Intellectual Property Institute 
(IEPI) has received two compulsory license petitions under 
procedures issued on January 15.  The procedures provide the 
detailed follow-up to Presidential Decree 118, issued in October 
2009 (refs A and B), which established access to medicines as a 
"public interest" and provided a policy framework for compulsory 
licensing of pharmaceutical products.  The petitions were submitted 
by two companies for the public non-commercial use of Abbott's HIV 
treatment drug Kaletra.  Only one of Kaletra's two components is 
under patent in Ecuador.  Once all documentary requirements are 
met, IEPI will consult with the Ministry of Health before making a 
final determination.  The GoE has taken pains to draft the 
compulsory license resolution in a manner it believes will make it 
difficult to challenge in the WTO.  The local Abbott representative 
expressed doubts that local or foreign manufacturers could 
effectively copy Kaletra because of the technological complexity of 
producing the "combination drug."  Nonetheless, issuance of a 
compulsory license would likely reduce the willingness of 
international research and development pharmaceutical companies to 
introduce new products in the Ecuadorian market.  End Summary. 
 
 
 
IEPI Issues Compulsory License Resolution 
 
 
 
¶2.   (U)   On January 15, Ecuador's Intellectual Property Institute 
(IEPI) issued Resolution No. 10-04 P-IEPI providing specific 
procedures for applying for compulsory licenses of patented 
pharmaceutical products.  (Note, IEPI is currently drafting a 
resolution to cover compulsory licenses of agrochemicals).  The 
resolution has been forwarded to the Department for translation. 
According to the resolution, interested parties may apply for 
compulsory licenses within two categories: public non-commercial 
use, and commercial use. 
 
 
 
¶3.   (SBU)   The IEPI resolution stipulates that petitions for 
"public non-commercial use" compulsory licenses must state that 
production or importation of the licensed product will be used 
primarily to supply the domestic market and be used for public 
non-commercial use.  For the purpose of the resolution, public 
non-commercial use refers to "the processes of acquiring 
pharmaceuticals by Ecuadorian public sector entities to cover 
(supply) their respective health programs."  In essence, if the 
license will be used to produce or import pharmaceuticals for sale 
to the government, it will be considered for public non-commercial 
use, even if the licensee makes a profit in the transaction.  The 
petition also must include a proposal for pricing the product. 
Note, under WTO Trade Related Intellectual Property Rights 
Agreement (TRIPs) rules, to be granted a compulsory license, the 
party seeking the license must have made an effort to obtain 
authorization from the patent right holder on reasonable commercial 
terms and conditions, but could not within a reasonable period of 
time successfully conclude those negotiations.   This requirement 
may be waived in cases of public non-commercial use. 
 
 
 
¶4.  (SBU)  To petition for a commercial use compulsory license, the 
potential licensee must state that the product to be produced will 
be used primarily to supply the domestic market and prove that they 
have attempted to obtain the authorization of the right holder on 
reasonable commercial terms and conditions, but have not obtained a 
favorable response within 45 days.  This provision does not appear 
to entitle the licensee to import the product under the compulsory 
license.  The petition must also include a pricing proposal. 
 
 
 
Two Petitions for Compulsory Licenses, So Far... 
 
 
 
¶5.  (C)   In a meeting February 3, IEPI president Andres Ycaza told 
 
Emboffs that IEPI had received two compulsory license petitions. 
The petitions were from two different companies, but for the same 
product - Abbott's Kaletra (protease inhibitor for treatment of 
HIV).  Ycaza said IEPI had requested the companies submit 
additional documentation before it would review the petitions. 
Once/if all documentary requirements have been met, IEPI will 
consult with the Ministry of Health for a determination on whether 
the medicine in question "is used to treat illnesses that affect 
the Ecuadorian population and that are public health priorities." 
Should the Ministry of Health make a positive determination, IEPI 
would then make a final decision on issuing the compulsory 
licenses.  Ycaza passed this information to Emboffs confidentially 
- please protect accordingly. 
 
 
 
¶6.  (C)   Embassy has alerted Abbott, but has asked that they not 
give attribution to the Embassy when discussing with GoE officials. 
Abbott no longer has production facilities in Ecuador;  equipment 
from the company's one production facility was sold in 2005 and the 
land in 2008.  According to Abbott's local representative, Ricardo 
Lama, the company sells Kaletra in Ecuador under the name Aluvia, 
and at a vastly reduced "differential rate" of about $90 per month 
for treatment, versus a cost of around $600 per month in the United 
States.  The name was changed to try to limit smuggling of the 
product into other markets where cost is higher.  Lama said 
"Kaletra," a combination drug, is not patented in Ecuador, but one 
of its two components is.  He said the production process for 
Kaletra is technologically complex and would not be easy to copy by 
local or foreign manufacturers.  Abbott produces all Kaletra in a 
single plant in Germany.  So far, no country has issued a 
compulsory license for Kaletra. 
 
 
 
¶7.   (C)   In speculating about Abbott's response should a 
compulsory license be issued, Lama said if Abbott receives 
sufficient royalty payments, it would likely keep Aluvia in the 
market, since doctors and patients prefer the brand product. 
However, he doubted Abbott would introduce any new products into 
the Ecuadorian market.  He also noted that Abbott is very concerned 
about the implications for other markets should Ecuador issue a 
compulsory license. 
 
 
 
Action Request 
 
 
 
¶8.   (C)   The local association representing international R&D 
pharmaceutical companies (Corporacion Industria Farmaceutica de 
Investigation - IFI) was provided an opportunity by IEPI to review 
and comment on the compulsory license resolution prior to 
publication.  IFI and some of its members have told Emboffs that 
they believe the resolution is largely compliant with TRIPs, 
although some would like to have the negotiation period extended to 
six months, as currently provided for under domestic intellectual 
property legislation.  In another area, Ycaza indicated that IEPI 
had consulted with IPR experts at the WTO regarding the definition 
of "public non-commercial use" within the resolution.  Post would 
appreciate Washington analysis of whether or not this provision is 
WTO compliant. 
 
 
 
Comment 
 
 
 
¶9.  (C)   It remains to be seen on what scale compulsory licenses 
for pharmaceutical products will be sought and issued here.  We 
suspect that enthusiasm may wane once the challenges of producing 
some of the newest, and most sought after, drugs becomes apparent. 
Nonetheless, there is potential for real damage not just to the 
patent holders, but to the health of Ecuadorians as well, due to 
public administration of inferior copies of patented drugs, or lack 
of access to new medicines should R&D pharmaceutical companies pull 
back from introducing new drugs into this market for fear of 
compulsory licensing. 
HODGES