Commercialization of pharmaceuticals in Chile: key things to know

Three key things to know about the changing landscape of commercialization of pharmaceuticals in Chile

The commercialization of pharmaceutical drugs in Chile is facing one of its most important moments in history as it seeks to strike a balance between the private and public interests.

Extremely high out-of-pocket costs of branded pharmaceuticals have negatively impacted the public’s access to health and renewed the debate on whether the government should help regulate sales prices for pharmaceuticals in the country. Indeed, a number of amendments are currently pending before the Chilean legislative bodies. The debate is naturally confronting the positions of the pharmaceutical industry, patients and the Chilean government in its double role as guarantor of the right to life and  health and promoter of the economic development of the country.

1. “Drugs II”: should the government intervene in the commercialization of pharmaceuticals?

Since 2015, the Chilean Parliament has been discussing the so-called Bill “Drugs II”, which seeks to update the regulations concerning bioequivalence, in place since 1967, while preventing the vertical integration between pharmacies and pharmaceutical laboratories. The bill is being reviewed and several changes are being promoted by the current Chilean president and legislators. If approved, the bill will bring several important challenges to manufacturers, distributors, pharmacies, drugstores, health professionals and patients including:

    Doctor’s prescription should be exclusively under the “International Nonproprietary Name” (INN).

    Pharmacies’ obligation to inform the customers on the generic versions available for the drugs prescribed by their doctors under the INN.

    Drug labeling changes, so that the product packaging includes the INN in a size that is at least one third of the main faces of the packaging, while the trademark may not exceed one fifth of the space used by the INN.

    Greater faculties for the Institute of Public Health, in terms of granting marketing approvals for pharmaceutical medicaments under their INN and requesting the patent right holders to include in their patent applications the INN corresponding to the claimed   pharmaceutical compounds.Some apprehensions have been raised concerning pharmacies and their pharmacists if the bill is finally approved, as they would have increased ability to influence and direct the consumer’s purchasing decision. Another concern, given that Chile lacks an effective standardization system on pharmaceutical bioequivalence, is that the bill could essentially codify a law that restricts the exercise of the medical profession. In addition, there is a perception that the bill could potentially promote collusion practices between pharmaceutical companies and pharmacies. The fear is not unfounded as from 2008 to 2012 some of the main pharmacy chains in Chile were found to have participate in price fixing schemes related to at least 222 pharmaceuticals, most targeted for the treatment of chronic diseases.

In May 2018, the Chilean president announced that one of the main goals of his administration is to achieve a substantial reduction of the drugs prices —of at least 30%—and demand greater transparency of the pharmaceutical industry. In this sense, the Chilean president proposed additions to the bill that seek to accomplish the following:

    encourage the use of the INN in medical prescriptions, establishing the exchangeability between the bioequivalent generic products and the trademarked ones;

    create an online drug price comparator (www.tufarmacia.gob.cl) to allow locating the closest pharmacies offering the best price for a particular pharmaceutical products; and

    permit the sale of certain pharmaceutical products in supermarkets’ and pharmacies’ shelves, among other aspects.

These additions are seen as a more balanced approach to the exchangeability than the bill as initially presented. For example, the original bill did not contemplate the bioequivalence condition to substitute a trademarked drug by a generic product. Requiring bioequivalence helps ensure that the branded and generics are of comparable quality, such that the patient’s safety will not be compromised, while enhancing the free competition and the market transparency.

The Ministry of Health has also proposed its additions to the bill, but not without controversy.

The Ministry has advocated for allowing the National Health Service System (CENABAST) to intermediate in the purchase of drugs and medical supplies between manufacturers/distributors and private customers, such as small/community drugstores, in the case of “inaccessibility to pharmaceutical products caused by economic, financial, geographical or opportunity barriers preventing from accessing a determined drug”.

This could mean a relevant change in the CENABAST’s role. Currently it is a public institution only in charge of ensuring the availability of drugs, food, supplies and equipment to the Chilean public health network, thereby intermediating between private suppliers and public customers exclusively. If the Ministry’s initiative is adopted, the government would directly intervene in the commercialization of pharmaceutical products under the premise of still imprecise circumstances of “inaccessibility to pharmaceutical products.” Such intervention could impact the open Chilean market as the “economic, financial, geographical or opportunity barriers” preventing access to a medical treatment and/or drug could be caused by a myriad of reasons. Moreover, the intervention seems to be reductant where in justified cases and due to public health reasons, Chilean Industrial Property Law provides for legal mechanisms to grant compulsory licenses on pharmaceutical patents. 

2. The Sofosbuvir Case: first compulsory license discussion in Chile

On March 2018, the outgoing Minister of Health issued a resolution determining that there are reasons of public interest to justify granting one or more compulsory licenses for the exploitation of patents protecting the active ingredient Sofosbuvir, as well as its combinations with other direct-acting retrovirals, useful for the treatment of chronic hepatitis C.

The Resolution stated that the Ministry of Health will take the necessary measures to achieve this purpose, which in practice translates into the possibility of filing a compulsory license claim before the National Institute of Industrial Property (INAPI) against at least two patents already registered for the active ingredient Sofosbuvir: Patents Nº 49,840 and Nº 51,404, owned by Gilead Pharmasset LLC. And Gilead Sciences Inc. ( jointly “Gilead”).

This Resolution is the first of its kind in Chile and responds to an initiative put forward by patients, parliamentarians and Corporación Innovarte, exposing the health problems that hepatitis C patients have been facing in Chile. According to the joint group calling for the measure, the high cost of medicines available in the local market for their treatment, versus “alternative” drugs of foreign manufacture— which they alleged-could be up to 90% cheaper than those currently available to patients in private and government run health centers —now that hepatitis C has been included in the pathologies covered by the so-called national plan of Explicit Health Guarantees (Auge-GES).

The current administration, which assumed power days after the Resolution was enacted, has inherited the public debate on its impact and reopened the conversation as to whether a more detailed analysis is needed to strike a balance between the rights of the public and the rights of the private companies developing pharmaceuticals. Among the points for discussion are:

 Actual/updated proportion of patients affected in Chile by the disease, as well as their prognosis in case of adopting the treatment with Sofosbuvir and its combinations with other direct-acting retrovirals.

 Prevalence of the disease in Chile at an endemic level, such as to establish reasons of extreme urgency that demand measures of the same order (for example, granting compulsory licenses for the manufacture, importation, sale and/or distribution of an active ingredient) and/or pharmaceutical combinations protected by one or more patents in the national territory).

 The high out-of-pocket cost implied in access to health in Chile, due to an apparent imbalance between the availability of broader Government’s subsidies and the lack of an effective regulation capable of guarantee a significant co-payment between private insurers and the patient especially in the case of complex pathologies of high social sensitivity like this one.

Gilead filed an administrative action seeking reconsideration on the Resolution, as well as an invalidity action against the administrative act of the Ministry of Health that dictated the Resolution. The reconsideration action was dismissed and, as of the date of this article, the invalidity action is still pending.

Adding to the complexity of the situation is the impact that a decision in this case would have on Chile’s existing obligations as party to multilateral and bilateral important commercial agreements, because of the possible effects and repercussions of a legal breach of those agreements by Chile. For example, the public seems to endorse a view that there is a deliberate delay to decide the future of the resolution because of the on-going renegotiation of Chile’s Free Trade Agreement with the European Union.

The core of the debate, however, is not focused on the compulsory licenses per se, as they are transversally recognized as a legal mechanism to ensure the necessary flexibility of the patent system in certain and justified cases. The controversy is instead focused on the interpretation of the reasons that would support the grant of a patent compulsory license. For the Resolution at hand, the Ministry of Health cited “economic inaccessibility” due to the high prices of patented medicines in Chile as the bases for the public health reasons that could be used to grant a compulsory license over valid patents in Chile.

3. Amending Chilean IP Law to create an exception to infringement: preparation or manufacture of drugs “under medical prescription in certain individual cases”

In July 2018, the National Institute of Industrial Property (INAPI) proposed a bill to partially amend the Chilean Industrial Property Law by incorporating rules that would make selfexecuting several of the international treaties to which Chile must adhere as part of the renegotiation of the Free Trade Agreement signed with the European Union in 2003¹. Of relevance to pharmaceutical companies are the provisions in the bill that seek to (i) incorporate the provisional applications category for patent rights; and (ii) set up new patent right limitations, such as private acts with no commercial purposes,  experimental and educational acts and the preparation/manufacture of drugs under medical prescription in certain individual cases.

The bill was made available to the Industrial Property stakeholders for a brief comment period. The final version of the bill is currently being considered by the Ministry of the General Secretariat of the Presidency (SEGPRES).

The provision introducing new patent right limitations, particularly in connection with the preparation or manufacture of drugs “under medical prescription in certain individual cases” is one of the most challenging reforms pursued by this bill. For many, the language is a very broad interpretation of the patent right limitation. Not surprisingly, patent owners have raised their concerns, requesting a clarification on the extent of that phrase in the bill and urging INAPI to reconsider its wording. So far, unofficially INAPI has declared that the spirit of that legal amendment is to permit the drug portioning in consideration of certain diseases and special patient conditions. Nevertheless, it is clear that this specific aspect of the bill requires more detailed revision to secure the observance and enforcement of patent rights in Chile. Without further revision, this provision implies the possibility of creating a legal loophole for potential infringers.

Conclusion

There is no doubt that the players in the Chilean pharmaceutical market can all agree that it is necessary to balance the opportunities for access to effective medicines at increasingly convenient prices. This debate has the potential to serve as a prompt to create new and better solutions that stimulate the fair competition in the Chilean market, without discouraging or harming the pharmaceutical innovative community that benefits from longstanding protection of its rights in Chile. Stay tuned for an interesting debate.

Francesca Rodríguez Spinelli,
Alessandri Attorneys at Law