by Gabriel Di Blasi*

Brazil’s economic crisis in 1997, which culminated in the depreciation of the nation’ s currency, had repercussions within the country’ s pharmaceutical industry. The double-digit growth, which had occurred annually until 1997, fell by 26% during the following two years. However, since then, the overall economy, including pharmaceuticals, has made a strong recovery.

Although private healthcare plans now cover more than a half of the population, making medicines more affordable for most Brazilians, the government has nonetheless taken measures to impose stronger controls on pharmaceuticals and private healthcare plans through the National Health Surveillance Agency (Anvisa). Those measures include:

• Re-imposing strict price controls on prescription drugs in 2001;
• Implementing a law favouring generic drugs in 1999 along with regulations designed to ease entry into the Brazilian market of such generics as antibiotics, anti-hypertensives and anti-ulcerants.
• Maintaining special health programmes, such as mass vaccinations, which are administered by the government at least three times a year and makes available free to the population.
• Promoting an anti-AIDS campaign, which is expected to result in larger purchases of medicines used to make the so-called AIDS Cocktail.

The combination of intense competition from imitation products and generic drugs, the prior currency devaluation, and the expiration of some 75 patents on best- selling medicinal drugs within the past year has seriously eroded the price of original brands. In response, manufacturers have focused on slashing production costs, investing in modernising and adding production capacity to their facilities to boost their output of generics.

The allure of a promising pharmaceutical market, especially for generic drugs (the Brazilian government is expected to purchase almost the entire production of generic drugs to distribute as medicines to the poor through the public health care system), in a country with a burgeoning population and a government committed to making medicines available to all in need has further encouraged entry of foreign investment.

Brazilian Market Challenges

Despite the strength of the local pharmaceutical market, the Brazilian government faces serious problems of infrastructure that could hamper its ability to keep pace with the growth of pharmaceuticals.

These include the inability to reach large segments of the low-income population, the widespread practice of self-medication with prescriptions accounting for less than a half of the market, a relatively weak currency, high interest rates and stifling price controls.

Scope of patent protection

Brazilian law imposes virtually no restrictions on the patentability of pharmaceuticals, chemicals and biotechnological inventions. This means that virtually all types of claims can be filed, including those relating to compounds, uses, formulae and processes. Basically, there are two exceptions:

• Brazil’s patent law does not accept patents for processes designed to provide curative therapy or to achieve conclusive diagnostic results. However, this exclusion does not extend to non-therapeutic or diagnostic processes, such as those aimed at cosmetic treatment, which can be patented.
• There is also resistance in some quarters, namely Anvisa, to accepting patents for so-called second medicinal use, on the grounds that such use is detrimental to the Brazilian economy. That view directly contradicts the position of the Brazilian Patent Office (“BPO”), in which the guidelines of the examination of the BPO allow patents for second medical use.

Protection conferred by patents

A Brazilian patent is valid for 20 years from the date the application was filed with the BPO or from the international filing date for applications based on the Patent Cooperation Treaty (PCT). Brazilian law mandates that the patent term be valid for a minimum of ten 10 years from the date the patent was granted, except when examination by the BPO was suspended due to a pending judicial order or any reasons which are beyond its control.

A patent entitles its owner to prevent third parties from manufacturing, using, offering or selling a product or process that encroaches on the patent without the owner’s consent and authorises the owner to license the patent rights to third parties. The preparation of a patented medicine pursuant to a bona fide prescription by a qualified professional, as well as the medicine thus prepared, does not constitute patent infringement.

Infringement/damages

Under the Brazilian patent law enacted in 1996 (the Patent Law), a patent bars anyone other than the owner (or those authorised by the owner) from doing work that employs the patent.

Regarding registration of a generic product, a new amendment to the Patent Law permits the use of a patent solely to acquire information, data and test results as a prelude to obtaining approval from Anvisa to market the product, provided the generic product is commercialised after the patent term has expired.

Transitional rules – pipeline patents

The Patent Law established transitional (i.e., “pipeline”) rules for pending pharmaceutical patents applied for either before or during the period from 15th May 1996 to15th May 1997, while the Patent Law was being enacted. For patents filed after that period, the pipeline rules do not apply.

Main applicable laws related to pharmaceutical patents

The Patent Law has been in force since 15th May 1996 for the rules regarding pipeline patents, and since 15th May1997 for all other patents.
Other pertinent laws introduced in Brazil during the past two decades include:

• Decree No. 3,201/99 amended by Decree 4,830/03, which refers to the ex officio grant of a compulsory license in the event of national emergency and/or public interest.
• Law No. 10,196/01, which basically establishes a new patentability requirement for applications claiming pharmaceutical products or processes. Such applications require approval from Anvisa before the BPO can grant a patent. This law also statutorily rejects many pending applications that would potentially benefit from Articles 70.2 and 70.7 of the World Trade Organization ́s TRIPS Agreement.
• The Anvisa Statement, published on August 2004, which bars patent applications claiming second medical use.

Drugs marketed prior to the Current Patent Law

Law No. 10,196 further amended the Patent Law to statutorily deny all pending applications filed before 31st December 1994 from claiming products or processes designed to create or modify pharmaceutical products or medicines, or processes designed to create or modify foodstuff products.
Applications withdrawn and re-filed under the pipeline provisions are exempted from this statutory rejection. The practical relevance of this amendment is the following:

• No application filed after 15th May 1997 will be affected by this law, as far as patentable subject matter is concerned;
• Applications claiming pharmaceutical products, medicines, foodstuff products and/or the respective processes for obtaining them, filed before 31st December 1994 and not converted into pipeline applications by 15th May 1997, will be considered rejected.
• Applications filed between 1st January 1995 and 15th May 1997 claiming pharmaceutical products or products for use in agriculture (Art. 70.8 of TRIPs), will be analyzed as per the Patent Law;
• Applications filed between 1st January 1995 and 15th May 1997 claiming processes designed to create and/or modify pharmaceutical products, medicines and foodstuff products will be considered rejected;
• Applications claiming chemical products not included in the previous paragraphs, filed before May 15, 1997 and not converted into “pipeline” applications, will be considered rejected.

Litigation

Lawsuits involving the BPO (e.g. against the grant of a patent) are under the jurisdiction of the federal courts of Rio de Janeiro. Though such courts are not specialised, the judges presiding there generally have expertise in intellectual property matters, including patent law.

In contrast, patent infringement actions come under the jurisdiction of state courts, where the level of judicial expertise in intellectual property matters varies with the state in which the case is adjudicated. No matter what their level of expertise, all judges are legally obligated to work with experts, who provide support in handling technological matters.

The case law involving pharmaceuticals patents is relatively new and thus sparse, since the prior Patent Law did not allow pharmaceutical patents. Most of the decisions pertain to enforcement of TRIPS and to new time limits. The courts have yet to rule on a major technological issue.

Compulsory license

Under the Patent Law, a patent is generally subject to a compulsory license by a third party if a) the patent owner has exercised patent rights in an abusive manner; b) an administrative or court decision has held the patent owner liable for abuse of economic power under the terms of the law; c) the invention is not effectively used in Brazil; or d) commercialising the patent does not satisfy market needs.

A compulsory license will also be granted where one patent depends on another and where the subject matter of the dependent patent constitutes a substantial technological advancement over the nondependent one. Moreover, the patent owner must prove that no agreement has been reached with the patent owner of the dependent patent to exploit the dependent patent. A process patent may be viewed as dependent on a product patent and vice versa. Also, the owner of the non-dependent patent has the right to a compulsory cross licence of the dependent patent.

A compulsory licence may also be granted in the event of national emergency or in public interest , as declared by an act of the federal executive authorities, insofar as the patent owner or its licensee does not meet such need, and provided that the rights of the patent owner are not prejudiced. Such a provision seems to be supported by TRIPS.

However, the Patent Law states that a compulsory license will not be granted if the patent owner: a) justifies non-use for legitimate reasons; b) proves that serious and effective preparations for exploitation have been carried out; or c) justifies lack of manufacture or commercialisation due to legal obstacles.

A compulsory licence may be requested by a party only with a legitimate interest as well as the technical and economic capability to exploit the subject matter of the patent, which should be reserved predominantly for the internal market. Lastly, compulsory licences based on lack of local exploitation may be requested only after three years following grant of the patent.

One question most pharmaceutical companies based outside of Brazil interested in investing in the Brazilian market pose is whether the compulsory license is a practical or a merely academic issue. Although compulsory licenses are included in the law and may be invoked by third parties, few cases for compulsory licence appear in the Industrial Property Journal. The few that have appeared have apparently ended in a voluntary agreement between the parties.

Compulsory licensing is a tool more frequently used by the government to press the pharmaceutical companies to lower the price of medicines or prevent further price hikes. Therefore, it is arguably more of an academic issue which the government has raised in the media against pharmaceutical companies.

Data exclusivity

Test results and other undisclosed data related to the marketing and/or commercialisation of the patented product or process are protected for an unlimited period provided they are kept exclusive and secret.
However, the Patent Law stipulates an exception to this rule by allowing unauthorised third parties to use privileged technical information, as well as database and test results of a patent owner to produce information to obtain marketing and/or commercialisation of the patented product in Brazil or abroad, provided the product is commercialised after the patent term has expired. Such practices do not constitute patent infringement.
Regarding pharmaceutical products for veterinary use, special protection of information exists for the following periods:

• For products that use new chemical or biological entities, the period is five years from the grant of registration or until the first release of the information in any country, whichever occurs first, with a minimum of one year of protection guaranteed.
• For products that do not use new chemical or biological entities, the period is five years from the grant of registration or until the first release of information in any country, whichever occurs first, with a minimum of one year of protection guaranteed.
• For new data required after grant of registration for products mentioned in the items above, the remainder of the term of protection granted for the data in the corresponding registration or one year from the presentation of the new data, whichever occurs last.

In this regard, despite the problems faced in connection with Brazilian patent law and regulations, the pharmaceutical market in Brazil may be a goldmine, rather than a minefield, if a viable business model is selected and if investors looks beyond Brazil itself to widen their focus to consider Brazil’s advantageous geographical position in Latin America.

* Published in IAM Magazine – supplement IP Value in the Life Sciences industries.