WTO TRIPS Council (October 2019): Statement of South Africa on the Transparency of R&D Costs and Pricing of Medicines and Health Technology

On Friday, 18 October 2019, South Africa delivered the following statement at the WTO TRIPS Council on transparency of R&D Costs and Pricing of Medicines and Health Technology.

Intellectual Property and the Public Interest: R&D Costs and Pricing of Medicines and Health Technology

Mr Chairman,

This topic is a continuation of a sustained debate regarding the intersection between intellectual property and public interest. Public interest is a central component of the of the TRIPS Agreement, which recognizes underlying public policy objectives of national systems for the protection of intellectual property. The protection and enforcement of intellectual property rights is not an end in itself. Article 7 of the TRIPS Agreement recognizes that intellectual property rights must contribute to the promotion of technological innovation and the transfer and dissemination of technology to the advantage of all stakeholders, including the users of technological knowledge and in a manner conducive to social and economic welfare.

In September 2015, 193 Member States of the United Nations adopted the 2030 Agenda for Sustainable Development (2030 Agenda). This agenda includes Sustainable Development Goal (SDG) 3 that aims to ensure healthy lives and promote the well-being of all people of all ages.

The WTO is central to achieving the 2030 Agenda for Sustainable Development Goals (SDGs), which sets targets to be achieved by 2030 in areas such as poverty reduction. Trade has proven to be an engine for development and poverty reduction by boosting growth, particularly in developing countries. Target 3.b underscores the importance of support for R&D of vaccines and medicines for the communicable and non-communicable diseases that primarily affect developing countries. The Doha Declaration on the TRIPS Agreement and Public Health affirms the right of developing countries to use to the full the provisions in the TRIPS Agreement regarding flexibilities to protect public health and, in particular, provide access to affordable medicines and medical technologies for all.

The Doha Declaration on the TRIPS Agreement and Public Health recognizes both the importance of intellectual property for the development of new medicines and concerns that intellectual property rights affect medicine pricing. 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.

Mr. Chairman, I do not propose to read the entire paper, however I would want to focus on or two further areas before I turn to the questions. 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.

South Africa 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.

We would like Member to share their experiences around the following questions:

  • 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?