CROSS-BORDER TRADE IN PHARMACEUTICALS FREE TRADE .pdf by suchufp

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									                     Gowling Lafleur Henderson LLP   Barristers & Solicitors   Patent & Trade Mark Agents




                                              Wendy J. Wagner
CROSS-BORDER TRADE IN                         Gowling Lafleur Henderson LLP
                                              Ottawa
PHARMACEUTICALS:                              Tel: 786-0213
FREE TRADE OR ILLEGAL TRADE?                  Fax: 788-3642
                                              email: wendy.wagner@gowlings.com
                          Gowling Lafleur Henderson LLP | Barristers & Solicitors | Patent & Trade Mark Agents |



OVERVIEW


 I.    Importation of Canadian prescription drugs into the US by
       American consumers and U.S. “storefront” operations is
       illegal
 II.   Can an illegally imported product be freely traded?
       Canada’s obligations under international trade rules
 III. Tools to control or prevent Canadian Internet pharmacies
      from exporting prescription drugs in circumstances where
      the importation of the drugs is illegal
                                      Gowling Lafleur Henderson LLP | Barristers & Solicitors | Patent & Trade Mark Agents |



I.         ILLEGALITY

     THE CROSS-BORDER TRADE VIOLATES UNITED STATES FOOD AND DRUG
     LAWS, PHARMACY AND MEDICAL STANDARDS

           All prescription drugs that are not approved by the U.S. FDA are prohibited from
           importation into the United States
       •      The Federal Food, Drug and Cosmetics Act, 21 U.S.C. ¶ 301 et seq.
       •      Title 21, Code of Federal Regulations (21 CFR) ¶ 314.50

           The FDA lacks jurisdiction to compel Canadian Internet pharmacies to comply with
           U.S. law and has requested Health Canada’s assistance:

              “To simply say it’s not our problem, these are not the words of a helpful
              partner … when it comes to the health and safety of the American public,
              we are reaching out to them in the spirit of cooperation, asking for their
              assistance”.
                                              - Mark McLellan, former FDA Commissioner

           Importation contravenes state laws requiring pharmacies to register with state
           boards of pharmacy and medical standards requiring examination of a patient.
                              Gowling Lafleur Henderson LLP | Barristers & Solicitors | Patent & Trade Mark Agents |



I.      ILLEGALITY

     THE CROSS-BORDER TRADE RESULTS IN WIDESPREAD
     INFRINGEMENT OF U.S. PATENTS

       Patent holders have the right to attach terms and conditions on the sale
       and distribution on their product (market segregation).
       The importation of Canadian drugs into the United States infringes
       patent rights if:
         • a U.S. company owns parallel U.S. and Canadian patents and
           restricts the sale under the Canadian patent to Canada
         • a U.S. company grants an exclusive licence to a Canadian
           subsidiary to manufacture the drug under the Canadian patent while
           the U.S. company retains rights under the U.S. patents
       The exportation of prescription drugs can also infringe the Canadian
       patent if the licence for sale restricts sale to Canada.
                                Gowling Lafleur Henderson LLP | Barristers & Solicitors | Patent & Trade Mark Agents |



I.    ILLEGALITY


     If importation into the United States is illegal, why doesn’t U.S. Customs
     block importation?


     If the export and/or import infringes U.S. and Canadian patents, why don’t
     pharmaceutical companies who own the patents sue for infringement or
     breach of contract or simply ration the supply of drugs to Canada?

         “The world’s largest drug maker revealed yesterday it has cut off its supply
         to two major Canadian wholesalers in a dramatic bid to stem the export of
         Medicare to the United States”.
                                National Post, Friday, February 27, 2004:
                                Drug Giant Cuts Supply to Canada:
                               Gowling Lafleur Henderson LLP | Barristers & Solicitors | Patent & Trade Mark Agents |



II.    INTERNATIONAL TRADE RULES


      Free Trade versus Parallel Trade- the Grey Market in pharmaceuticals.

         “Parallel trade occurs when differences in national economic,
         social, legal or regulatory regimes result in different prices among
         countries, creating opportunities for arbitrage”.
                                            - Barfield and Groombridge 1999

         “The primary difference between parallel trade and free trade is
         that free trade occurs with the voluntary participation of all parties.

         Parallel trade, on the other hand, opposes the interests and
         wishes of the the affected manufacturers”
                                            - John R. Graham - Fraser Institute
                               Gowling Lafleur Henderson LLP | Barristers & Solicitors | Patent & Trade Mark Agents |



II. INTERNATIONAL TRADE RULES


   Concepts of:
   .  national exhaustion
   .  regional exhaustion
   .  international exhaustion


   International trade agreements give countries the right to exclude imports of products
   that infringe national intellectual property rights, but do not require laws against
   parallel importation - the “grey market” remains a “grey area” in international trade
    •   WTO TRIPS Agreement
          – Article 28(1)(a): A Patent shall confer on its owner the following exclusive rights: (a)
            where the subject matter of a patent is a product, to prevent third parties not having
            the owner’s consent from the acts of: making, using, offering for sale, selling or
            importing for these purposes that product
          – Article 6: For the purposes of dispute settlement under this Agreement, subject to the
            provisions of Articles 3 and 4 nothing in this Agreement shall be used to address the
            issue of exhaustion of intellectual property rights
                         Gowling Lafleur Henderson LLP | Barristers & Solicitors | Patent & Trade Mark Agents |



II. INTERNATIONAL TRADE RULES


   North American Free Trade Agreement (NAFTA)


   1709(5)(a)   where the subject matter of a patent is a product, the
                patent shall confer on the patent owner the right to
                prevent other persons from making, using or selling the
                subject matter of the patent, without the patent owner’s
                consent;
   1709(9)      each party shall permit patent owners to assign and
                transfer by succession their patents and to conclude
                licences.
                            Gowling Lafleur Henderson LLP | Barristers & Solicitors | Patent & Trade Mark Agents |



II. INTERNATIONAL TRADE RULES


 Does NAFTA obligate Canada to prevent the export of prescription
 drugs when Canada knows that the importation of the drugs into the
 United States is illegal?

     NAFTA - Government to Government Dispute Settlement

     Does Canada’s failure to prevent drug exports deny U.S. drug
     companies “effective action” against infringement of U.S. patents.
                                                       - NAFTA Article 1701, 1714

     Does Canada’s failure to prevent drug exports “nullify or impair”
     the benefits U.S. drug companies expected to enjoy under NAFTA?
                                                       - NAFTA Annex 2004
                               Gowling Lafleur Henderson LLP | Barristers & Solicitors | Patent & Trade Mark Agents |



II. INTERNATIONAL TRADE RULES


 NAFTA Chapter 11 - Investor - State Dispute Settlement
 NAFTA Article 1105(1):

  Each party shall accord to investments of investors of another party treatment in
  accordance with international law, including fair and equitable treatment and full
  protection and security.

       The “minimum standard of treatment” includes protection from “arbitrary” and
       “discriminatory” acts or omissions that impair the economic interest of a foreign
       investor.

       Canada’s inaction permits Canadian Internet pharmacies to operate in a regulatory
       void. Wilful disregard for the illegality is arbitrary.

       Canada’s inaction has a disadvantageous effect on U.S. pharmaceutical
       companies’ revenue and ability to exploit patent rights that is discriminatory.
                             Gowling Lafleur Henderson LLP | Barristers & Solicitors | Patent & Trade Mark Agents |


III.   TOOLS TO CONTROL EXPORTS OF
       PRESCRIPTION DRUGS FROM CANADA


   Export Control List
       Goods can be added to Canada’s Export Control List to:
         • ensure that there is an adequate supply and distribution of the
           article in Canada for defence or other needs (section 3(e)
           Export and Import Permits Act)
         • implement an intergovernmental arrangement or commitment
           (section 3(d) Export and Import Permits Act)
                                  Gowling Lafleur Henderson LLP | Barristers & Solicitors | Patent & Trade Mark Agents |


III.    TOOLS TO CONTROL EXPORTS OF
        PRESCRIPTION DRUGS FROM CANADA


   Export Control List - Supply
   • Prescription drug sales in Canada represent less than 2% of the world pharmaceutical
     market, sales in the U.S. amount to 40%. Can Canada supply a virtually unlimited
     demand for drugs by U.S. residents?
   • Pharmasave:
       “It is extremely damaging to the integrity of Canadian health care when human and
           material resources are diverted from Canadians to American, particularly during
           these times of resource shortages…”


   • Canadian International Pharmacy Association (representing Internet pharmacies)
         “it (Canadian International Pharmacy Association) could not meet all of the needs
         without jeopardizing the supply of prescription drugs in Canada”
                                               - Canadian Press, Friday, December 19, 2003
                                               “Canadian Company cannot supply enough drugs
                                               to meet Wisconsin’s needs.”
                                  Gowling Lafleur Henderson LLP | Barristers & Solicitors | Patent & Trade Mark Agents |


III.    TOOLS TO CONTROL EXPORTS OF
        PRESCRIPTION DRUGS FROM CANADA

   Export Control List – Intergovernmental Arrangement or Commitment
       U.S. FDA - Customs enforcement depends on the ability and willingness of
       foreign regulatory bodies to investigate and take actions against website
       operators who are illegally shipping the drugs.
          “Tens of thousands of parcels the FDA does not review are eventually released by
          Customs and sent on to their addresses, even though the products contained in these
          parcels may violate the FD&C Act and pose a health risk to consumers. We do not
          believe this is an acceptable health outcome.
       U.S. Administration and FDA - widespread export of Canadian drugs to the U.S.
       will lead to Canada being used as a “port” for counterfeit and contaminated
       drugs.
   January 27, 2004 FDA Blitz
   •   of 1,006 parcels that entered through mail 80% were from Canada
          “during the import blitz, we have examples where our examinations revealed that
          products were manufactured in countries other than Canada, yet were exported from
          Canada”.
                            Gowling Lafleur Henderson LLP | Barristers & Solicitors | Patent & Trade Mark Agents |


III.     TOOLS TO CONTROL EXPORTS OF
         PRESCRIPTION DRUGS FROM CANADA


   Other Options
       Health Canada export permit requirement
       New Zealand ban on retail sale for export

								
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