US embassy cable - 05TAIPEI4764

UNCLAS SECTION 01 OF 02 TAIPEI 004764 
 
SIPDIS 
 
STATE FOR EAP/RSP/TC ADN EB/TPP/MTA/IPC, STATE PASS AIT/W 
AND USTR, USTR FOR WINTERS AND WINELAND, USDOC FOR 
4431/ITA/MAX/AP/OPB/TAIWAN/MBMORGAN 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, KIPR, TW, Trade, ESTH, IPR 
SUBJECT: TAIWAN ISSUES TAMIFLU COMPULSORY LICENSE, BUT DOES 
IT MATTER? 
 
 
1.  Summary: Taiwan Intellectual Property Office (TIPO) 
Deputy Director General Jack Lu announced late November 25 
that Taiwan would grant the Taiwan Department of Health (DOH) 
a restricted license to produce Tamiflu, despite the fact 
that negotiations between DOH and patent-holder Roche were 
on-going.  The Taiwan government justified its decision to 
issue the compulsory license by claiming Roche was unable to 
provided Taiwan with sufficient doses of the Avian Influenza 
(AI) treatment to meet World Health Organization (WHO) 
recommended guidelines.  The license requires DOH to first 
exhaust Roche-produced stock of Tamiflu before distributing 
locally manufactured medicine and prohibits the export of 
product manufactured under the license.  Roche's spokesperson 
insisted the company could meet Taiwan demand and charged 
that Taiwan's drug manufacturers did not have the 
technological capability to produce the drug.  End Summary. 
 
2.  Following several months of negotiations between Taiwan's 
DOH and Swiss drug-manufacturer Roche over supply of AI 
treatment Tamiflu, discussions which included the licensing 
of local production, TIPO announced November 25 that it would 
license DOH to produce a copy of the drug.  However, TIPO's 
announcement stipulated that locally produced versions would 
be solely for domestic use and would be used only in the 
event that supplies of Roche-produced Tamiflu were exhausted. 
 Roche's spokesperson countered in the press that Taiwan 
lacked the technical capability to produce Tamiflu.  She 
insisted that Roche would be able to provide Taiwan with the 
necessary supply. 
 
=============================== 
Taiwan Seeking Self-sufficiency 
=============================== 
 
3.  According to TIPO's Director of International Affairs 
Bennet Chen, Taiwan currently has only enough Tamiflu in 
stock to treat less than 1% of the population, well below the 
WHO recommended stockpile of 10% of the population (2.3 
million doses for Taiwan.)  It was only after several months 
of negotiations with Roche that DOH on October 313 applied to 
TIPO for a compulsory license of Roche's patent, he said. 
After much discussion within TIPO, it was decide to grant a 
conditional license valid until December 2007 or until a 
licensing agreement is concluded between Taiwan and Roche. 
 
4.  DOH Bureau of Pharmaceutical Affairs Director General 
Liao Chi-chow told AIT that Roche had promised to provide 
Taiwan with 2.3 million doses of Tamiflu by June 2006, but 
that Taiwan health officials were concerned that the most 
dangerous period for AI infections was likely to be between 
January and March of 2006.  Roche had been adamantly opposed 
to licensing Tamiflu production to a Taiwan manufacturer, 
Liao said.  Given the global demand for Tamiflu, he doubted 
that Roche would be able to meet its commitment and dismissed 
Roche's pledge as empty talk. 
 
5.  Liao insisted that Taiwan has four or five manufacturers 
that are technically capable of producing Tamiflu.  He 
predicted that DOH would conduct an open tender for Tamiflu 
production in January.  Liao was uncertain when locally 
manufactured product might be available for the Taiwan 
market.  When asked how DOH planned to ensure that the local 
production of the drug did not leak onto the market or out of 
Taiwan, he responded that the Taiwan Center for Disease 
Control (Taiwan CDC) would maintain the stockpile in their 
warehouse and would be responsible for the security of the 
product. 
 
============================= 
TIPO Tries to Divide the Baby 
============================= 
 
6.  TIPO DDG Lu noted that Taiwan's decision was fully in 
compliance with Article 31 of the TRIPS Agreement and that 
use of locally produced Tamiflu would be strictly limited and 
controlled by DOH.  Lu suggested that TIPO had done its best 
to respect Roche's patent rights by requiring DOH to first 
deplete its stock of Tamiflu before turning to locally 
produced drugs and by prohibiting the export of any drugs 
produced under the compulsory license.  Negotiations between 
Roche and DOH over compensation and continued purchases of 
Tamiflu were continuing, he said.  Given the potential human 
cost of an AI pandemic, TIPO decided it was better to issue 
the license to DOH for local manufacture and restrict the 
usage of the resulting product.  This was their attempt at a 
compromise solution, offered Lu.  That the announcement came 
just days before important local elections, he claimed, was 
purely coincidental. 
 
============================= 
Comment: A Perplexing Outcome 
============================= 
 
7.  Roche announced November 26 that the Indonesian 
government was free to produce Tamiflu without a license and 
followed with similar announcements November 28 regarding 
Thailand and the Philippines.  In these countries, Roche had 
reportedly not filed a patent and therefore claimed not to 
have any patent protection.  However, Roche's willingness to 
cede the field in these countries, all potentially larger 
markets than Taiwan, makes the inability of the two sides to 
come to an agreement in Taiwan puzzling.  TIPO has 
spearheaded a drive to improve intellectual property rights 
protection in Taiwan over the past several years, but has 
also shown a willingness to use TRIPS Article 31 to allow the 
use of patents without the authorization of the rightsholder 
in certain instances.  Taiwan issued a compulsory license for 
patents to produce CD-Rs in July 2004 after years of 
negotiations between patent holder Philips and local optical 
disk manufacturers over royalty payments broke down, but 
resisted doing so when Taiwan peer-to-peer file sharing 
service Kuro claimed it was unable to reach a negotiated 
royalty plan with the International Federation of 
Phonographic Industries (IFPI). 
 
8.  Equally perplexing is how Taiwan plans to provide locally 
produced Tamiflu in time to make a difference.  DOH 
identifies the greatest period of risk as January to March 
2006 and plans to open a tender in January 2006.  Any company 
winning a tender will then need to develop a production 
capacity, acquire the raw materials, and train staff.  It is 
hard to imagine that regular production will begin in time to 
make any significant quantity of the drug available by March. 
Paal