UPDATE: In November 2018, South Africa notified the WTO Secretariat that Brazil and India requested to co-sponsor this submission on Promoting Public Health Through Competition Law and Policy.
On 29 October 2018, the World Trade Organization (WTO) published a submission (IP/C/W/649) by South Africa to the TRIPS Council on Promoting Public Health Through Competition Law and Policy. This paper is a follow up to a joint submission by South Africa, China, Brazil and India in May 2018 on the ad hoc item, Intellectual Property and the Public Interest: Promoting Public Health Through Competition Law and Policy.
In making the case for the further treatment of competition law and policy at the TRIPS Council, the South African paper notes:
It is also apparent that clearer competition policy treatment of IPRs has evolved overtime through either iterative processes or evolving practice of competition authorities. This evolution is informed by jurisdictional cross-fertilization and peer learning as evidenced by greater interest in and concerns with ensuring an appropriate balance between IP and competition law and policy in these jurisdictions. This development underscores the need for further debate and analysis since competition law and policy is no longer the preoccupation of only a few jurisdictions…
As a consequence of accommodating the variety of potential competition approaches, remedies available to address anti-competitive behaviour may permit a broader range of remedial action than some other public health-related flexibilities associated solely with patents. Competition policy has an important role to play in ensuring access to medical technology and fostering innovation in the pharmaceutical sector. (Source: IP/C/W/649).
South Africa’s submission highlights the rich diversity in the application of competition law to remedy anti-competitive practices. The paper notes:
Since a substantial body of precedent exist, the sponsor of this document wishes to demonstrate that many WTO Members already use competition law to address various anti-competitive practices that affect access to medicines and medical technologies. Practices that have been identified as detrimental include, but are not limited to the following instances: (i) abuses of IPRs due to a refusal to deal with or imposition of overly restrictive conditions in medical technology licensing; (ii) preventing generic competition through anti-competitive patent settlement agreements; (iii) mergers between pharmaceutical companies that lead to undesirable concentration of research and development and IPRs; (iv) cartel agreements between pharmaceutical companies, including between manufacturers of generics; (v) anti-competitive behaviour in the medical retail and other related sectors; and (vi) bid rigging in public procurement. In this respect, not all jurisdictions follow the same approach, for instance, refusal to license may amount to an abuse of dominance in some jurisdictions while others consider this within the rights of IPR holders. (Source: Ibid)
In relation to the interpretation of the TRIPS Agreement, South Africa references the WTO panel in Australia – Tobacco Plain Packaging stating that the Panel
noted that paragraph 5 of the Doha Declaration is formulated in general terms, thereby inviting the interpreter of the TRIPS Agreement to read “each provision of the TRIPS Agreement”in light of the object and purpose of the Agreement, as expressed in particular in its objectives and principles. Fundamentally, the panel concludes that paragraph 5 of the Doha Declaration constitutes a subsequent agreement of WTO Members within the meaning of Article 31(3)(a) of the Vienna Convention on the Law of Treaties. This finding may have important consequences for how flexibilities in the TRIPS Agreement are interpreted. (Source: Ibid)
South Africa proposed the following set of guiding questions to advance the TRIPS Council’s discussions on competition law and policy to achieve public health outcomes.
(1) What types of behaviours do WTO Members consider abuses of intellectual property rights in the pharmaceutical and medical sectors? Has there been any evolution in the approaches that WTO Members take to assess such types of behaviours?
2) What examples of best practice can Members identify on the subject of the control and remedies for excessive pricing? Are there context-specific methodologies employed by Members for determining if prices are excessive, and the mechanisms to remedy and control pricing abuse?
(3) What examples of best practice can be identified through national competition laws and practices? Are there certain common trends that can be identified across various jurisdictions?
(4) To what extent can technical assistance and capacity building contribute to the delivery of more effective policies by WTO Members in the field of competition law to address the abuse of intellectual property rights?
One can expect South Africa’s second submission on “competition law and policy to achieve public health outcomes” to generate a robust debate at the upcoming TRIPS Council on 8-9 November 2018 based on the intense discussions of this subject at the June 2018 TRIPS Council. The full text of South Africa’s October 2018 submission on competition can be found here.
At the June 2018 session of the TRIPS Council, the United States said:
The cosponsors also invoke the 2030 Agenda for Sustainable Development, in particular Sustainable Development Goal 3. It is important to note that nowhere in the 2030 Agenda is competition law or policy prescribed as a way to achieve the SDG targets. In fact, misapplication of competition law to IP cases could make it more difficult to achieve certain goals, such as ending communicable diseases, promoting newborn and infant health, and supporting the research and development of vaccines and medicines as we do not currently have all of the health technologies needed to fully address these challenges.
The competition issues raised in the submission, such as liability for excessive pricing and the use of compulsory licensing remedies, have been debated in more competition-focused international organizations such as the OECD and the International Competition Network (ICN). As these raise competition, not IP issues, those are more appropriate venues than the TRIPS Council to address such issues.
The United States does not regulate “excessive pricing” under US antitrust law and we have encouraged jurisdictions that have excessive pricing laws to refrain from applying them to IP rights, which are designed to promote innovation through, among other things, investment in R&D. Antitrust enforcers who impose liability for pricing “too high” may deter R&D investment because they supplant market-based forces with an artificial cap.”
We believe it is also important to consider that it is not illegal merely to have market power or a monopoly; many monopolists obtained their position by creating better, cheaper, more attractive products. This system promotes innovation because it incentivizes first-entrants to develop the best product. It also creates incentives for rivals or new entrants drawn by the lure of large rewards. (Source: Minutes of Meeting Held in the Centre William Rappard on 5-6 June 2018, IP/C/M/89/Add.1, 13 September 2018).
The European Union provided the following perspective in June 2018:
While there are a number issues in the Communication the EU disagrees with, we would like to particularly voice concern over the mentioning of “refining the criteria for grant of a patent (patentability criteria)” as a TRIPS flexibility. The TRIPS agreement is very clear and unambiguous on patentability criteria. TRIPS Article 27 (1) states very unmistakably that: “patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.” We see with growing concern that misinterpretation of this Article has led many jurisdictions to apply practices in the patent grant process which could be interpreted as amounting to additional patentability criteria not mentioned in the TRIPS agreement. The EU urges those Members to reconsider their practices.
In the general, the EU would also be cautious to consider the use of competition policy a TRIPS flexibility. Without doubt, the TRIPS agreement is compatible with the application of competition policy measures. However, as clearly provided for in Article 8 (1) and (2), as well as in Article 40 (2), these measures have to be consistent with the provisions of the TRIPS agreement and cannot be used as tools in avoiding the obligations under the Agreement….
Compulsory licences to pharmaceutical patents as a remedy to excessive pricing would have a negative impact on innovation incentives and appear to be superfluous, because a competition authority, once it has established unlawful market behaviour, has the normal toolbox of competition policy remedies.