Israel: Parallel Importation Of Pharmaceuticals To Israel

Last Updated: 14 November 2002

By a recent amendment of Israeli law, parallel importation of a pharmaceutical is now permitted in terms of the regulatory scheme applicable to pharmaceuticals.

Under the new regulatory scheme, permit may now be granted to any person or entity (and not only the manufacturer or its agent), to import a registered pharmaceutical. In addition, under the new regulatory scheme, permit may now be granted to a Pharmaceutical Trading House or any Recognized Institution to import a Compatible Preparation (a pharmaceutical identical to a registered pharmaceutical)

The Supreme Court dismissed a petition that challenged the validity of the new amendment. It held that the new amendment is neutral as regards Intellectual Property rights -- Patentees should seek remedy by way of filing infringement action against applicants for import permit.

Introduction

Parallel importation is a hot and controversial topic in the international IP arena. The State of Israel has added to the controversy when it amended its regulatory scheme and significantly amended the rules, which, until then (with few exceptions), prohibited parallel import of pharmaceuticals.

Shortly before the new legislation came into force, several pharmaceutical companies filed a petition with the Israeli Supreme court and challenged the validity of this legislation. Last month, the Supreme Court dismissed the petition and affirmed the validity of the new legislation. The Supreme Court's judgement, however, left unresolved the intellectual property law issues arising in connection with parallel import.

Importation of pharmaceuticals to Israel requires a permit from the Ministry of Health ("MOH"). Ever since the State of Israel was established (with a limited exception introduced several years ago1), pharmaceuticals were imported into Israel only by the original manufacturers of pharmaceutical preparations or the manufacturer's agent.

The legal situation changed at the end of the year 2000, when an amendment to the statutory scheme came into force2 (the "amendment"). In essence, inasmuch as the MOH regulatory scheme is concerned, parallel importation of pharmaceuticals is now permitted.

Under the new regulatory scheme, it is now allowed to import pharmaceuticals (which are registered in Israel by the manufacturer or its Israeli agent) not under appointment of the manufacturer. In addition, it is now allowed to import pharmaceutical preparations, which are not registered in Israel (if such a pharmaceutical is compatible to a registered preparation).

In this article we will briefly review the new rules applicable to importation of registered preparations by a person or entity not being the Israeli agent of the original manufacturer and the new rules applicable to importation of Compatible (non registered) preparations. We will then comment on the judgment of the Supreme Court and the interrelations of the new amendment with the Intellectual Property laws of the State of Israel.

Parallel Importation of a Registered Preparation

Until this amendment, an application for registration of a Pharmaceutical could have been filed only by the original manufacturer or by its agent in Israel (with one exception). Accordingly, only the manufacturer, or its Israeli agent, was entitled to import Pharmaceuticals. One of the two major changes brought by the amendment is that any person or entity (and not only the manufacturer or its agent) may now apply for an Importation Permit of a registered pharmaceutical, if such applicant meets the terms prescribed by the MOH in accordance with the Regulations3. The requirements for obtaining an import permit are not rigorous and can easily be met. An importation permit is normally granted for a period of two years and it is published in the MOH website.4 A preparation imported in accordance with these provisions may not be re-exported.

Importation of Compatible Preparations

As yet another result of the last amendment, any Pharmaceutical Trading House5 or any Recognized Institution6 may now import and market a pharmaceutical even if it is not registered in the Registered Pharmaceuticals Book, if such pharmaceutical is a Compatible Preparation7 and if, in addition, the requirements concerning transportation storage are met.

An applicant for a permit to import a Compatible Preparation must therefore provide in its application information and data that the drug product he wishes to import meets these standards. An importation permit for a Compatible Preparation is normally granted for a period of two years and is published in the MOH website. A preparation imported in accordance with these provisions may not be re-exported

The Intellectual Property Issues Arising From The Amendment

Late in 2000, several pharmaceutical companies filed a petition with the Supreme Court, asking the Court to nullify the amendment to the Pharmacists Ordinance. Among others,8 one of the arguments put forward by the petitioners was that the new law might be interpreted as permitting parallel importation of patented drugs. An additional argument advanced by the petitioners was that the statutory scheme described above violates Israel's TRIPS obligations, particularly in the area of data exclusivity (Article 39(3) of TRIPS) and effective enforcement measures (PART III of TRIPS; "Enforcement of Intellectual Property Rights")

Shortly after the petition was filed, the Supreme Court refused an application to issue in interim order against the coming into force of the new statutory provisions. It later heard the parties' arguments to the merits of the petition and final judgement was issued last month (June 2001).

The Supreme Court's judgement: Neutrality of the Amendment as regards Intellectual Property Rights

The Supreme dismissed the petition. It accepted the position expressed by the Ministry of Justice ("MOJ") that the amended Pharmacists Ordinance is silent, or neutral, as regards the issue of Intellectual Property protection. The court found that the Amendment does not derogate from Intellectual Property protection provided by other legislation. It ruled that the MOH should decide or refuse an application for an Import permit based on regulatory issues and that the MOH should not involve itself with the question of patent infringement. A patentee who believes that an applicant for import permits intends to infringe his patent should thus apply to the court and seek a restraining order.

The Supreme Court's Judgement: A Hidden Ruling On Data Exclusivity?

As noted, one of the arguments made by the petitioners was that the Amendment contravenes Israel's obligation under Article 39(3) of TRIPS to prevent unfair commercial use of the data contained on the registration file. This is because, so argued the petitioners, the Amendment permits the MOH to issue import permits on the basis of the registration files.

The Supreme Court summarily dismissed this ground of the petition. It noted that by issuing the import permit the MOH does not disclose the data contained in the registration and that such use of the file by the MOH does not constitute unfair commercial use of the data contained on the registration file by the applicant for the permit. The issue of Data Exclusivity was not the crux of the petition but this statement by the Supreme Court may serve as reinforcement to the position of the government, which, until now, was reluctant to promote data exclusivity legislation.

Parallel Importation Of Pharmaceuticals And Intellectual Property Rights - A Hint For The Future?

As explained, the Supreme Court was not obliged to decide the question of parallel importation of goods protected by Intellectual Property rights10,because it found that the Amendment is silent in this regard. However, the Supreme Courts' comments on this issue may serve as a hint for future developments in the IP arena.

Parallel import of trademark goods

The Supreme Court referred to the rule laid down by it thirty years ago, C.A. 471/70 J. R. Geigy S.A v. Pazchim Ltd., P.D 24 (2) 705. The court in Geigy held that importation and sale of original products does not constitute a trademark infringement and, accordingly, parallel importation of trademarked products is allowed.11

Parallel import of patented goods

The Supreme Court did not, to date, decide the question whether importation of patented goods (which were manufactured outside of Israel with the permission of the patentee) constitutes a patent infringement. In its judgement under review, the Court noted that the ruling with respect to parallel importation of trademarked goods might not necessarily apply in the case of patented goods, because of the different rationales for these two branches of Intellectual Property law. The Supreme Court mentioned, with some criticism, two decisions12 of the District Court of Tel Aviv, in which the District Court expressed the opinion that, in general, parallel importation of patented good is prohibited and that the concept of international exhaustion does not apply to Israeli patent laws. The Supreme Court then continued to review certain developments in foreign jurisdictions in this regard. The Supreme Court concluded by noting that it is in favor of adoption of international exhaustion, but it did not formally decide this issue.

Parallel import of copyrighted works

The Israeli Supreme Court also did not yet resolve the question whether parallel import of copyrighted works is lawful. This question was not discussed in the recent judgment under discussion, but will be noted here, for the sake of completion. It was submitted13 that parallel import of copyrighted works constitutes copyright infringement. This view is based on the language of section 2(2) of the Copyright Act, 1911. However, in at least one case decided by a District Court, an application for a temporary restraining order against a parallel importer of copyrighted goods was refused.

Conclusion

The new regulatory scheme entered into force in September 2001. The Supreme Court has now dismissed the petition against its validity. At least 9 permits have already been granted. The issue of whether parallel importation of a patented pharmaceutical is permissible or not, is still not resolved. It will now be for the patentees to seek relief from the District Court, in the framework of patent infringement action that may be filed, in appropriate circumstances, against holders of parallel import permits. The final position of Israeli law regarding international exhaustion is yet to be resolved

1. In 1993, the Pharmacists Regulations (Preparations), 1986 were amended, to allow certain health institutions to import pharmaceuticals, for use by such institution for treatment of their patients.

2. In 1999 the Israeli parliament (Knesset) passed an amendment to the Pharmacist Ordinance [New Version], 1983, namely, the Pharmacists Ordinance

(Amendment No. 11) Law, 1999. The amendment was implemented by an amendment to the Pharmacists Regulations (Preparations), 1986, which was promulgated in June 2000 and which came into force in September 2000.

3. An applicant who is not the proprietor of the registration or its agent, may be granted in importation permit he shows that the pharmaceutical was transported to Israel by authorized traders in Recognized Countries and that the preparation was stored in its way to Israel only in Recognized Countries. The following Countries are currently considered Recognized Countries: (i) the United State; (ii) Canada; (iii)a country which is a member of the European Union; (iv) Switzerland; (v) Norway; (vi) Iceland; (vii) Australia; (viii) New Zealand; (ix) Japan; (x) Israel.

4. http://www.health.gov.il/units/pharmacy/maslul.htm

5. A Pharmaceutical Trading House is defined as "a business managed by a Pharmacist In Charge approved by the Director General [of the MOH] for this purpose and which serves for storage, wholesale sales or wholesale distribution of preparations, or of raw materials for manufacture of preparations.

6. A Recognized Institution is defined as any of the following institutions which was recognized by the Minister of Health for this purpose: (i) a Sick Fund; (ii) a governmental hospital, a hospital owned by a Sick Fund and any hospital which is a Public Institution within the meaning of same under section 9 of the Income Tax Ordinance; (iii) A corporation established in accordance with a decision of the government for provision of Preparations.

7. A Compatible Preparation is defined as "a preparation that is compatible to a registered preparation which received ... an authorization that it is identical to the registered preparation:

(i) in the composition of its active ingredient, in its form, in its method of administration, in its quality, in its level of safety and in its medical activity; and (ii) in the method of its manufacture".

8. The petitioners argued that the new statutory scheme endangers the public safety and that the process of legislation was procedurally flawed. Those issues will not be reviewed here.

9. The court affirmed its 40 years old judgment in ACJ 280/60 Abic Chemical Labs. Ltd. v. The import of Pharmaceutical Preparations authorities, PD 15(2)1323

10. We note, by way of a general comment, that Israeli statutory Intellectual Property laws do not expressly deal with the issue of parallel import. The issue is governed by case law and different results were arrived at, depending of the nature of the Intellectual Property right in question.

11. However, the Israeli courts have not yet resolved issues like re-packaging, unauthorized embossing of a trademark, material change of character since the product was first put on the market, defacing packaging to remove codes and the like.

12. C.F. 1182/95, 1183/95 Yu Zeng et al v. El Shai Import and Marketing Ltd. et al (Not reported;

February 8, 1999); C.F. 1242/97 S.D.R Armor Import and Marketing Ltd. V. Cohen Hadad for Trading Ltd. et al (Not reported; May 30, 1999).

13. Naamat O. "Prevention of Parallel importation in copyright Law",40 Hapraklit (1991), p.125-147

This article was prepared by Eran Bareket, Adv. of Gilat, Bareket & Co.

Gilat, Bareket & Co. serves as the legal department of Reinhold Cohn & Partners.

The article provided above is for informational purposes only. It is not provided for the purpose of providing legal advise and may not be considered or relied upon as such.

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