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GOVERNMENT RELATIONS PLAN FOR A MULTINATIONAL


PHARMACEUTICAL FIRM

I. Overall Situation
Pfizer is in “survival” mode as it faces challenges from generic drug
manufacturers competing with its most popular pharmaceuticals. Generic drugs
have seen strong growth in recent years because of high healthcare costs and
an ageing population in many Western countries, and because drugs from
traditional pharmaceutical firms have lost patent protection.

Pfizer is considering options for its consumer business. It is struggling to improve


its sales and earnings in the wake of patent losses on several important drugs,
sluggish sales of key medicines, litigation, and an overall more competitive
marketplace. It makes sense for Pfizer to redeploy the money and energy it puts
into the consumer business into higher growth opportunities.

But for its Human Health Division overall, Pfizer said 2005 had been a
challenging year owing to slower sales of the pain reliever Celebrex and the
market withdrawal of a similar drug Bextra over safety concerns. Revenue from
new drugs could offset declining sales in medicines losing patent protection
(Norvasc and Zoloft). Sales of Pfizer’s second best-selling drug Norvasc were
down 1% at $1.24-B. Pfizer has been hurt by increased generic competition for
several of its older drugs that have lost their patent protection.

II. Objective
Maximize the bottomline from medicines losing patent protection.

III. Strategy
Creating a political, regulatory, and social environment that keeps generic firms
at bay. It will continue to fight generic drugmakers who are “employing lawyers,
not medical researchers around the world to undermine confidence in research-
based companies and the jobs they support.”

IV. Tactics

A. Political

1. Legislative Branch
Rep. Reynaldo Aquino (Health Comm. Vice Chair) files a bill seeking to regulate
cost of medicines and more government support to develop the local
pharmaceutical industry last January. In April, Rep. Junie Cua (Trade & Industry
Comm.) and Rep. Antonio Yapha (Health Comm. Chair) pressed for government
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intervention thru a law that lowers drug prices. HB 499, authored by Rep. Arthur
Pingoy, Jr. seeks to shorten patent of drugs from 20 years to 10 years.

In the Senate’s Trade & Industry Technical Working Group last January, the
Philippine Chamber of Pharmaceutical Industry (PCPI) supported Sen. Mar
Roxas’-sponsored SB 2139, which calls for a less stringent patent regime for
medicines to allow the entry of the low-priced medicines. The Pharmaceutical
and Healthcare Association of the Philippines (PHAP) opposed SB 2139
because it violates the constitutional guarantees to due process of patent and
trademark owners. The rights of trademark owners are also infringed under the
bill because it allows the “unauthorized use of trademarks by government when it
imports and sells branded generics.” PHAP could be persuaded to argue that
“generics are yesterday’s drugs” and that favoring generics over newly-
developed pharmaceuticals is bad public policy.

Mar Roxas’ real play must be determined. Cheaper medicines for the masses
has always been his pet populist project since his DTI days. However, sources
disclosed that he worked closely with AGILE to impose the Actuarial Reserve
Limit (ARL) on the pre-need industry. Supposedly, Roxas, AIG, and other major
US insurance firms colluded because they want to take over the lucrative pre-
need industry from the local firms. The soft approach is recommended for Roxas.
Pfizer should take the backseat and let the US employ a carrot-and-stick
approach on Roxas and proponents of cheaper medicines in both the Senate
and the House. Having stayed in the US for a long time, there are many
intermediaries who can act on Roxas. Perhaps, the US Agency for International
Development (USAID) can be persuaded to introduce a drug distribution/
donation program in RP and other developing counties that stipulates that the US
must be the “preferred source and origin” when purchasing medicines.

As for legislative initiatives, it would be best to delay SB 2139 and HB 499 in


order for these not to be passed before December 2006. With the upcoming RP-
US Bilateral Free Trade Act (FTA), it must be argued that these two bills must not
preempt the comprehensive FTA until Congress enacts it. Because of the
elections next year, these would have to be refilled in the 14th Congress and
further delayed or watered down. PHAP and other trade groups can ostensibly
take the lead here.

2. Executive Branch
Last March, Health Secretary Duque directed BFAD to look into reports that
some pharmaceutical firms have been overcharging by 50% the prices of generic
and branded medicines. This came in the wake of Pfizer’s suit against PITC. The
Administration wants PITC to increase parallel importation so they can provide
cheaper medicines to win the support of key sectors and the masses for the Cha-
Cha campaign and the 2007 elections. Perhaps, Pfizer and the Administration
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can come to a compromise on what portion the government can keep on the
expected P2.39-B earnings from Norvasc beyond June 2007. Or an
accommodation can be reached wherein pharmaceutical firms can lower prices if
the government removes tariffs and taxes on health care products. Similarly,
pharmaceutical firms can offer more investments in R&D, technology transfer,
clinical trials in the country. As a last resort, the US can also pressure the
government on patent infringement by warnings and threatening sanctions as an
IPR Rogue State. The WTO, IMF, WB, and credit rating agencies can come into
play here. After all, the Philippine Government is a party to the Paris Convention
for the Protection of Industrial Property and the Patent Cooperation Treaty; it is
also a member of the World Intellectual Property Organization and the World
Trade Organization.

While World Trade Organization (WTO) rules confirm the right of countries to
issue compulsory licenses to permit the manufacture or importation of generic
versions of patented medicines, there is US pressure to on developing countries
to adopt bilateral “free trade” agreements (FTAs). This strategy of “competitive
liberalization” can induce the government to adopt a more favorable drug patent
law. Thailand is in high-stakes negotiations with the Bush Administration over the
right to use generic AIDS medicines. The proposed US-Thailand FTA contains
similar terms regarding drug patents that Singapore and Latin American
countries have faced in recent FTAs with the US. In the US-Thailand FTA, there
is a proposal that both the US and Thailand would be required to increase the
number of years that a pharmaceutical company can patent a drug to 25 years.
Such an extended term goes beyond current international trade rules of a 20-
year patent term. In a move that would extend the monopoly of US
pharmaceutical firms, the US also requires that test data on medicine be kept
secret under the FTA. And the agreement would lower the standard for treating
an intellectual property violation as a criminal offense for which imprisonment can
be imposed, instead of as a civil offense.

Two years ago, Pharma (Pharmaceutical Research and Manufacturers of


America), the powerful lobby group for the pharmaceutical industry, agitated
behind the scenes over the Australian Labor Party’s legislative amendment to
penalize frivolous lawsuits aimed at stopping cheaper, generic drugs coming on
to the market. US Trade Representative Robert Zoellick’s intervention indicated
that the pharma lobby has taken a look at Labor’s amendment and said we can’t
live with this. Any attempt to unravel the free-trade agreement would run into
strong opposition from the US government.

As the Philippines and the US are seen moving closer to a comprehensive


bilateral FTA deal, there is a short window of opportunity for US pharmaceutical
firms to address the generics problem swiftly and quietly. Aside from working with
the Executive and the Legislative Branches, pharmaceutical firms should closely
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collaborate with the US Trade Representative Office, the US-ASEAN Business
Council’s Philippine Business Committee, the American Chamber of Commerce,
the US-Philippines Trade and Investment Council, and the US Commercial
Attache. Based on bilateral FTA precedents with other countries, it can be
impressed upon Philippine negotiators that they can obtain many favored
protectionist provisions of their own (such as in the garments sector) in exchange
for accepting the US’ rules on intellectual property rights in bilateral deals and for
its continued “support” for the GMA Administration. It is key for the Philippines to
be part of a network of bilateral FTAs that will increase trade and investment
among its members.

3. Judicial Branch
Expect PITC’s lawyers to insist that drug patents can’t be considered “private
property” in the legal sense because they are only temporary and limited
monopoly grants intended to further public purposes. And that patent rights are
forfeited under “patent misuse” legal theories as punishment for abusing a patent
grant to the detriment of the public interest. Pfizer’s lawyers should remind PITC
that the Philippine Government is a party to the Paris Convention for the
Protection of Industrial Property and the Patent Cooperation Treaty; it is also a
member of the World Intellectual Property Organization and the World Trade
Organization. As they stress that Intellectual Property is now a company’s most
valuable asset, they can cite precedents of Pfizer’s victories in other countries:

A. Amlopidine Besylate
• January 2006 victory in Chicago against Apotex

B. Atorvastatin
• March 2006 victory in Madrid against Ratiopharm España
• December 2005 victory in the US against Ranbaxy
• October 2005 victory in the UK against Ranbaxy
• November 2005 victory in Norway against Ranbaxy
• Peru’s dismissal of the challenge to the patentability of Venezuelan
atorvastatin protects Pfizer’s patents in Peru, Ecuador, and Venezuela
• In March, Finland’s Helsinki court granted a preliminary injunction against
Ranbaxy prohibiting it from marketing a generic version of atorvastatin.

B. Public Relations
Pfizer has been beaten to the draw by Sec. Pagdanganan in the columns and
editorials of major broadsheets and tabloids in the past two months. Pfizer has
been defined as a heartless profiteer, which is a no-win situation as we approach
an election year. The pricing issue must be side-stepped.
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1. To defuse the PR crisis, the following key messages can be developed and
amplified:
• Innovations in pharmaceuticals are needed to save and preserve lives.
• Generics are yesterday’s drugs.
• Favoring generics over newly-developed pharmaceuticals is bad public
policy. Hudson Institute fellow Jeremiah Norris said WHO is assisting in
the expropriation of private property.
• Intellectual Property is now a company’s most valuable asset. Anticipate
that PITC will maintain that international legal rules for drug patents
explicitly authorize the manufacture and use of generics.
• Pfizer is in a fight for survival against generic drug firms. Cite its legal
victories in patents for amlopidine besylate and atorvastatin.
• Only R&D ensures that the public gets safe and effective medicines.
• Countries that violate IPR suffer in the long-run because investors will
avoid them. It is the poor who will suffer most.
• The dangers of counterfeit medicine. Cite WHO report on India as source
of 35% of the world’s counterfeit drugs.

2. Aside from TV & Radio personalities, influential columnists in broadsheets and


tabloids must be utilized to amplify abovementioned messages and Pfizer’s side
of the issue.

3. Increase CSR activities and publicity

4. Consider engaging a Crisis PR team to work side by side with lawyers.