Drug Patents Under Fire in Brazil

One of the most promising pharmaceutical markets of the future is Brazil, a nation of nearly 200 million people with a universal healthcare system.  Brazil’s infamously overloaded patent system has undergone a series of recent reforms.  One such “reform,” however, greatly complicates biopharmaceutical patent practice: any Brazilian patent application for products affecting “public health” must first be approved by the National Health Surveillance Agency (ANVISA), the Brazilian equivalent of the U.S. Food and Drug Administration, before ever being examined on the merits by the Brazilian Patent Office (known as the “INPI”).  This “fourth” prong of patentability threatens the viability of pharmaceutical patent protection in Brazil.

The “Prior Consent” System

Upon Brazil’s entry into the World Trade Organization in 1995, TRIPS compliance accompanying WTO membership mandated that Brazil offer pharmaceutical patent protection for the first time.  Accordingly, Brazil passed a TRIPS-compliant law (“LPI”) on May 14, 1996.  A transitional “pipeline” system was established to permit rapid patent allowance for pharmaceutical products already patented abroad.  In response to concerns about safety for a number of these pipeline patents, Brazil’s President signed an order in December, 1999 conditioning patentability of pharmaceuticals on “prior consent” by the National Health Surveillance Agency, known by its Portuguese abbreviation, ANVISA.  Brazil’s National Congress formally amended the LPI in February, 2001 to incorporate the prior consent language.

Nominally, ANVISA would prevent unsafe medicines from entering Brazil, but there were other incentives for implementing prior consent.  First, Brazil constitutionally guarantees free medical care for each citizen.  With a booming population, Brazil’s government craved cheaper drugs-if necessary, by controlling prices of patented drugs and favoring local generics.  Second, Brazil was nurturing its own nascent pharmaceutical industry.  The government’s strategy-prior consent, mandating (in violation of TRIPS) that foreign manufacturers “work” their patents by local manufacture in Brazil (though never enforced), and threatening compulsory licenses-has helped Brazil’s pharma producers quickly catch up with foreign competitors.

Struggles for Control

ANVISA faced opposition to its prior consent policies both inside and outside Brazil.  Brazil has appeared on the annual “Special 301” watch list issued by the Office of the United States Trade Representative each year since 2000, which identifies countries with IP policies that concern the U.S. Government.  From 2002-2006, Brazil appeared on the “Priority Watch List,” as a country causing the highest level of concern.  Consistently cited was the enormous backlog of pending patent applications before INPI, and in 2000, 2001, 2005, and 2006, the report specifically singled out prior consent as worsening the backlog.

Some pressures were internal, with growing conflict between patent examiners at INPI and at “COOPI,” the division of ANVISA created to review patents.  In response, Brazil’s Attorney General of the Union (AGU) released an official opinion in October, 2009, known popularly as “Opinion 210.”  Opinion 210 stated that ANVISA was not to determine patentability; instead, its role was solely to consult on technical elements while assisting INPI with its examination.  ANVISA, with the support of the Ministry of Health, sought revision or rescission of the opinion.  Instead, the AGU issued “final” Opinion 337/PGF/EA/2010 in January, 2011, which clearly stated that “ANVISA may not refuse the granting of the prior consent of art. 229-C of IP Law based on patentability requirements.”  Subsequently, several Brazilian courts ruled against ANVISA in 2011-2012, and limited its review of pharmaceutical patent applications.  Since Brazil is a civil law system, however, these decisions are merely persuasive authority.

Presidential signature of the final AGU opinion would have bound the entire executive branch, including ANVISA.  Instead, an Interministerial Working Group (“GTI”), comprising representatives from ANVISA, INPI, the Ministry of Health, and the AGU, emerged to further discuss the matter.

In May, 2012, the GTI released Joint Ordinance 1,065.  To the surprise of many, prior consent was not only upheld, but strengthened.  INPI will conduct preliminary review of all patent applications.  If any claims relate to pharmaceuticals, the application is forwarded to ANVISA before INPI’s formal review.  ANVISA may grant prior consent, seek amendments, or reject the application altogether.  INPI can only continue review after receiving ANVISA’s consent.  If ANVISA denies consent, the application is effectively dead.  Although ANVISA’s authority is limited to assessing the impact of patent applications on “public health” under LPI Article 18, most view this limitation as no obstacle and open to very broad interpretation.  Brazilian attorneys indeed

reported rejections of applications in 2012 from ANVISA based on patentability, not “public health.”

The Future of Brazilian Pharmaceutical Patents

Although appellate-level judicial decisions and “final” AGU opinions clearly oppose ANVISA’s review of pharmaceutical patent applications, those decisions do not bind the agency.  At present, it appears only three measures could change the perplexing status quo: new Congressional legislation amending the LPI, a decision by the Brazilian Supreme Court, or international WTO dispute-settlement proceedings predicated on TRIPS violations.  Although the stage is set for any or all of the three options, imminent action is unlikely.

As part of Ordinance 1,065, both ANVISA and INPI were charged with drafting new final rules defining patent examination going forward.  ANVISA published a proposed rule on October 16, 2012.  The rule reaffirms the hierarchy established by Ordinance 1,065 and states that ANVISA will consider whether patent applications are “contrary to public health” after receiving them from INPI.  The most significant provision was Art. 4, §1 of the rule, which (translated) states:

It is considered that the patent application is contrary to public health when:

I – The pharmaceutical product or process contained in the patent presents a health risk;

II – The patent application of the pharmaceutical product or process is of interest to the policies regulating the universal access to medicine and pharmaceutical assistance as provided for under SUS – Universal Public Health Care System – and that do not meet the patentability requirements and other criteria as established in the IP Law 9.279/1996.

Among those submitting comments during a 2012 public comment period was the Biotechnology Industry Organization (BIO), which identified several problems with the rule.  For example, what defines a “health risk” in Art. 4, §1(I)?  What makes patent applications “of interest” to the universal healthcare system?  Finally, who determines that applications do not meet patentability requirements?  ANVISA responded to some of these concerns by issuing a revised regulation on April 15, 2013.  A “health risk” exists when a pharmaceutical patent application concerns substances banned in Brazil.  Applications will be deemed “of interest” to SUS when they claim substances listed on the “strategic products” list for the national health system, or therapeutic purposes associated with the list.  ANVISA representatives have stated that applications not triggering the above situations will receive prior consent and will return to INPI for examination.

Amidst this chaos, a suggested course of action for pharmaceutical firms may be to continue to file Brazilian applications despite the re-emergence of prior consent.  This strategy offers the security of a filing date while Brazilian authorities work out early problems.  Furthermore, preliminary injunctions modifying ANVISA decisions may increasingly be available in Brazilian federal district courts on a case-by-case basis.

ANVISA’s April 2013 rule update assuages some fears about how prior consent will be implemented going forward, but the pharmaceutical industry should still pay careful attention to ongoing developments.  An expansion of the “strategic products” list for the state-run healthcare system would seem to be all that would be required to deny patent protection to high-profile drugs.  This policy may have short-term benefits for Brazilian-based pharmaceutical producers, but dire long-term economic consequences for everyone, as Brazilian citizens are denied cutting-edge therapies and foreign firms are denied significant market presence in one of the world’s largest countries.  Prior consent may be a temporary speed bump for the pharmaceutical industry, or it may be a canary in the coal mine for future battles in large markets with centralized healthcare systems – perhaps even a large, red-white-and-blue market to Brazil’s north.

This article is the opinion of its authors – Ryan O’Quinn, associate, and Sanya Sukduang, partner – and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm’s clients. O’Quinn can be reached at ryan.o’quinn@finnegan.com, Sukduang can be reached at sanya.sukduang@finnegan.com