US embassy cable - 04QUITO3053

UNCLAS QUITO 003053 
 
SIPDIS 
 
STATE PASS USTR BENNETT HARMAN 
 
E.O. 12958: N/A 
TAGS: ETRD, KIPR, EFIN, EC 
SUBJECT: PHARMACEUTICAL COMPANIES SEEK USG HELP ON GOE 
PROPOSAL TO LIMIT PROFITS 
 
 
1. See action request paragraph 7. 
 
2. Summary.  Econ and FCS met November 19 with 
representatives from Bristol Meyers and Pfizer.  The 
pharmaceutical representatives complained that the GOE is 
trying to exert further control over drug prices and company 
profits.  This latest initiative by the Ministry of Public 
Health is the second attempt in the last six months at 
decreasing drug prices by limiting drug company profits. 
According to the drug reps, if approved, the regulation would 
adversely affect international and local drug companies in 
Ecuador.  Emboffs explained that Intellectual Property 
Rights, particularly concerning pharmaceutical company 
concerns, have been an important and sensitive part of Andean 
Free Trade Agreement negotiations.  We promised to seek 
Washington guidance as to how to raise this issue with the 
GOE.  End Summary. 
 
 
Another Assault on Profits 
-------------------------- 
 
3. Pharmaceutical representatives explained to econ and 
commercial section officers on November 19 that the GOE was 
trying for the second time in the last six months to limit 
pharmaceutical prices, this time via a Presidential decree. 
Earlier this year, the GOE considered a draft law that would 
have reduced the maximum profit allowed drug companies for 
each individual product or presentation from 20% to 8%. 
After complaints from the industry and discussions with 
Emboffs, the GOE backed off from that initiative. 
 
4. The Ministry of Public Health is behind the latest 
initiative, according to the Bristol Meyers Squibb and Pfizer 
representatives.  Bristol Meyers' lawyer said the decree 
would redefine and lower the acceptable costs of 
pharmaceutical companies; thus, "artificially" inflating 
company profits and forcing them to reduce prices in order to 
keep under the 20% profit ceiling.  Other representatives 
noted that drug prices had already been frozen by the GOE for 
the last two years.  When questioned, they said the proposed 
decree would adversely affect both international drug 
companies and local generic drug producers. 
 
A Topic for the Trade Negotiators 
--------------------------------- 
 
5. Econoffs noted that intellectual property rights (IPR), 
particularly with respect to pharmaceutical products had been 
an important and sensitive part of the ongoing Andean Free 
Trade Agreement negotiations.  Given the sensitivity, the 
Embassy would request instructions from Washington before 
approaching the GOE about this issue. 
 
Comment and Action Request 
-------------------------- 
 
6. This latest salvo from the GOE is another attempt to 
address populist concerns about the price of drugs in 
Ecuador.  The fact that the proposed decree would adversely 
impact both major pharmaceutical companies and local 
producers of generic drugs means both will probably lobby 
against the proposal, making issuance of the decree less 
likely.  Still, any GOE effort to lower drug prices would be 
viewed favorably by many and the Gutierrez administration 
could use all the popular support it can get.  Thus, populist 
concerns could win the day. 
 
7. Action Request.  Post requests guidance from Washington on 
what, if any, next steps to take regarding the proposed 
decree. 
KENNEY