On Friday, 4 October 2019, the World Trade Organization (WTO) published a submission by the Republic of South Africa on “R&D Costs and Pricing of Medicines and Health Technologies” (IP/C/W/659). In this paper, South Africa requested the WTO TRIPS Council (which meets on 17 October 2019 and 18 October 2019) to address the transparency of R&D costs and pricing of medicines and health technologies. Following the trail blazed by Italy at the World Health Organization (WHO) in 2019, trade delegates covering intellectual property will now discuss transparency R&D costs and pricing of medicines and health technologies guided by the following questions posed by South Africa.
- What are the TRIPS flexibilities adopted by Members in their Patent laws to ensure availability of patented medicines at reasonable prices?
What are Members experiences with escalating prices of patented medicines and what are the policy responses implemented to address this trend through the use of TRIPS flexibilities?
- What approaches have Members implemented regarding price regulation of patented medicines such as a combination of cost-based pricing, value-based pricing, reference pricing, and/or through tendering and negotiation, and regulating mark-up levels? If any of these approaches have been used, what are the results and challenges that Members face to ensure compliance and disclosure of necessary information or their effect on the prices of medicines?
- What measures have Members implemented to enhance the publicly available information on the costs of manufacturing of medicines, vaccines and health technologies, in particular information on grants, tax credits or any other public sector subsidies and incentives relating to the initial regulatory approval and annually on the subsequent development of a product or procedure?
- Can Members share their experiences to improve the transparency of the patent landscape of medical technologies to ensure that no barriers are created to generic competition through sharing complete and up to date information?
In its submission, South Africa quoted the report of the UN Secretary General’s High-level Panel on Access to Medicines:
The UN Secretary General’s High-level Panel on Access to Medicines observed the following: “The rules governing human rights, trade and public health exist in separate but overlapping spheres; their implementation rests at different levels. An important factor behind the incoherence between trade, intellectual property laws, human rights and public health lies in the different accountability mechanisms and uneven levels of transparency.”It further observes that transparency is a core component of good governance, especially where civil society and patient groups rely on transparency of information. Transparency, as further stated, can also ensure fairness during negotiations that take place between biomedical companies and procurement organizations.
In relation to the current model of medical innovation, South Africa observed:
The current model of medical innovation is ill-equipped to respond to the increasing emergence of infectious diseases, the unprecedented explosion of NCDs and neglected tropical diseases. For developing and least developed countries (increasingly developed countries raise similar concerns) affected by inadequate funding for R&D and access to health technologies and medicines continue to struggle to ensure access to affordable medicine for their citizens. Prevailing high prices of medical technologies and medicines have been subject of much debate in the recent past.
In relation to R&D costs and the role of public funding, South Africa noted:
Pricing strategies are based on determinants such as, inter alia the cost of R&D, costs of production or financial returns to incentivize future R&D programmes. The true costs of R&D for pharmaceuticals are often unknown and highly variable, while the contribution made by public and non-profit-making sectors towards the R&D of medicines is not always accounted for. The marginal production costs of medicines are relatively small compared to their market prices while a significant proportion of this expenditure might be for marketing and promotional activities, which are costs not related to the development of the product.
In terms of South Africa’s expectations of the transparency discussions at the WTO TRIPS Council, South Africa provided the following perspective:
The sponsor of this communication calls on Members to share their experiences of how TRIPS flexibilities have been used to address high prices and barriers to access to medical technologies and medicines in order to achieve public health and related national objectives. In the past the impact of competition and anti-trust laws on access to medicines was explored in IP/C/W/643. The issue of abuse of IP rights remains relevant in the context of the application of national and regional norms to ensure cheaper and more effective access to medical technologies and medicine. Policies that influence the pricing of health technologies or the appropriate rewards for successful research outcomes can be better evaluated when there is reliable, transparent and sufficiently detailed data on the costs of R&D inputs (including information on the role of public funding and subsidies), the medical benefits and added therapeutic value of products.
For the full content of South Africa’s transparency submission to the WTO TRIPS Council please see the following link: