The Office of the US Trade Representatives (USTR), which defends US foreign trade interests, last week sharply criticized the Israeli cabinet decision's approval of a bill for regulating pharmaceutical intellectual property. The USTR believes that the proposed legislation is a step backwards from the US-Israeli understandings on this issue.
"Our patience is wearing thin," a USTR official told "Globes". "We're seriously considering reinstating Israel on the priority watch list of countries that violate intellectual property rights."
The official said the USTR upgraded Israel from the priority watch list to the watch list for 2004 because "we expected cooperation from Israel in pharmaceuticals. This expectation was not realized."
USTR now examining Israel for 2005 watch list
The official said that when the USTR upgraded Israel to the watch list, it simultaneously decided to carry out a non-regular examination to check whether Israel had carried out additional measures to improve its protection of intellectual property.
"This examination is now underway," said the official. "We're getting input from both American and Israeli pharmaceutical companies, including Teva. The examination is scheduled to be completed in a few weeks, and definitely by the end of the year. The results will determine on which list Israeli will be included for 2005."
Israel's categorization on the USTR's watch lists is a perennial matter of dispute between Israel and the US. Inclusion in the priority watch list would be a black mark against Israel, harming its relations with banks, financial institutions and investors.
Israel conducts feverish talks with the US at the beginning of almost every year, prior to the publication of the USTR watch lists in April, as Israeli officials attempt to prevent the country from being sentenced to inclusion on the priority watch list because of alleged Israeli infringements of intellectual property. It has been reported that US leniency toward Israel on this subject in 2004 was due to a personal decision by US Trade Representative Robert Zoellick, following talks with Minister of Industry Trade and Labor Ehud Olmert.
Leniency
Asked whether the threat to reinstate Israel in the priority watch list was extreme in the bilateral negotiations, the USTR official said, "This is not a new issue. It has been on the agenda since at least 2001. The warning bells didn’t sound now, but in the spring.
"Israel's proposals (prior to the USTR decision on Israel's categorization for 2004, R.D.) did not meet our demands. We were lenient and eased Israel's category in expectation that new proposals favoring us would be achieved. The extraordinary examination now underway is for this purpose.
"I cannot say that we met midway. Israel's current proposals are a step backwards, compared with its previous proposal. We're not deadlocked. There are different paths to the same objective, but our proposals were rejected."
The official said the US insisted on preserving information exclusivity for drug files deposited by US pharmaceutical companies with Israel's Ministry of Health, to obtain licensing for the drugs for the Israeli market.
OECD membership at risk
The Israeli bill grants such exclusivity for generic drugs marketed in Israel, but not for exports. The official said the bill was therefore unsatisfactory to the US. He said the Israeli market was tiny, whereas the global market was huge, and heavy losses to US companies would result.
He added that because a section in the bill left the door open to future amendments, it was unsatisfactory to the USTR, given Israeli past behavior on this and related issues. He said Israel simply did not uphold the principle of intellectual property of pharmaceutical companies.
The official said Israel did not meet OECD conventions on protecting intellectual property. "Israel has been trying to join this club for years, but it does not play by the rules of the game of the club's members in protecting intellectual property for pharmaceuticals."
Asked whether he was hinting that the US would withdraw its support for Israeli membership in the OECD, the official said he was not responsible for such decisions.
"Seeking a compromise"
The official said the US was well aware of the domestic pressures the Israeli government operated under. "Teva did what it had to do. It's only natural that it should lobby against protection of intellectual property rights. But every government should consider the overall picture and make the right decision," said the official.
"There are ways to make progress, and we hope that Israel will move toward our position. We're trying to find a compromise."
Sources in Washington, aware of Israel's position on the subject, said in response that Israel had met all its commitments to the US. "The Americans are trying to heat things up, while we're trying to cool them down. They're doing what they have to do, and we're doing what we have to do. We don’t want to make bombastic declarations."
Published by Globes [online] - www.globes.co.il - on September 19, 2004