JEANNETH VALDIVIESO Associated Press Writer — October 29, 2009

QUITO, Ecuador (AP) — Foreign pharmaceutical companies accepted on Wednesday Ecuador's decision to bypass patents in order to produce less expensive generic versions of some patented drugs.

President Rafael Correa issued a decree Monday giving Ecuadorean officials the power to grant local laboratories "compulsory licenses" to bypass patents and produce generic versions of designer drugs.

Under rules agreed by the World Trade Organization, countries can issue "compulsory licenses" to disregard patent rights, but only after negotiating with the patent owners and paying them adequate compensation.

If they declare a public health emergency, governments can skip the negotiating. Ecuador has not declared a public health emergency.

"We accept the democratic decision ... to use this extraordinary legal measure, observing the rights and responsibilities" laid out in international law, said Pfizer Inc., Bayer AG, Grunenthal and 11 other foreign drug companies in a statement through a local pharmaceutical industry association.

"No legal right of any kind can take precedence over the interests of public health," the statement read, though the companies said they did not share Ecuador's view that patents prevent care.

Silvana Tamayo, a spokeswoman for the pharmaceutical association, told The Associated Press that Ecuador's government has yet to initiate royalty negotiations with companies.

Correa says cheap generic drugs are needed to assure widespread access to medication. The decree did not specify which, or how many drugs patents could be bypassed.

The Ecuadorean Intellectual Property Rights Institute, charged with negotiating royalties with patent holders, has said payments could range from "0.5 percent to 10 percent of the cost of generic drugs" sold, and be paid monthly, quarterly or yearly.

Brazil, Thailand, Zimbabwe, Malaysia, Indonesia, and Thailand are among countries that invoked the "compulsory license" procedure to import cheap generic medicines, especially American AIDS drugs. Health campaigners have praised them, noting that patients who develop resistance to older anti-retrovirals need second-line drugs that can be prohibitively expensive.

Industry groups have pressured rich governments to dissuade developing nations from bypassing patents.

Thailand's move prompted the United States to place the country on a copyright watch list of nations where American companies face problems protecting intellectual property rights. Countries on the list are under extra scrutiny and can face trade sanctions if alleged violations worsen.


Associated Press Writer Andrew Whalen contributed to this report from Lima, Peru.