In February 2020, the World Trade Organization (WTO) de-restricted the minutes of the TRIPS Council’s October 2019 session. While the official minutes (IP/C/M/93/Add.1) were circulated to WTO members on 9 December 2019, the October 2019 minutes were only available to the general public in February 2020. In October 2019, South Africa requested the WTO TRIPS Council to examine the transparency of R&D costs and pricing of medicines and health technologies guided by these five questions:
The official minutes of the October 2019 TRIPS Council meeting can be found here.
At the October 2019 TRIPS Council, South Africa opened up discussions on transparency by noting the following:
610. 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. (Source: IP/C/M/93/Add.1, Page 67)
611. 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. (Ibid)
The responses of Switzerland, the United States of America, and the European Union to South Africa’a request to discuss the transparency of R&D costs and the pricing of medicines and health technologies at the TRIPS Council deserve further scrutiny.
In relation to pricing and biomedical R&D costs, Switzerland asserted that discussions of the “pricing of medicines as well as the cost of research and development to be outside of the purview of the TRIPS Council”.
680. My delegation considers also the pricing of medicines as well as the cost of research and development to be outside of the purview of the TRIPS Council. The WHO is currently examining questions in this regard, as the communication of South Africa also notes. (Ibid, Page 74)
681.Having said this, it would be misleading in this delegation’s view to imply that the price of a medicine is directly related to patents. To ask for a specific price, is not a right conferred by a patent on its owner. (Ibid)
The United States held that the pricing of medicines was a “very important issue that is currently being discussed in the United States”. The United States echoed Switzerland’s view that discussions on the pricing of medicines were not an appropriate for the TRIPS Council.
690. Pricing of medicines is a very important issue that is currently being discussed in the United States. (Ibid, Page 75)
691. However, we do not believe that it is an appropriate topic for TRIPS Council. (Ibid)
In relation to patentability criteria, the United States provided the following comment:
700. In terms of pricing, it is important that patents are not issued for old and obvious ideas and that the patent term is not inappropriately extended, so that generic manufacturers can make medicines available at lower price. (Ibid, Page 76)
The initial response of the European Union at the October 2019 TRIPS Council was a regurgitation of the position the EU expressed in November 2018 on intellectual property and competition; clearly the functionaries at the European External Action Service and DG Trade did not get the memo that South Africa’s proposal for October 2019 focused on the transparency of R&D costs and the pricing of medicines and health technologies. Here are some extracts from the European Union response.
627. As already stated at the TRIPS Council of November 2018, in general, we do not consider the TRIPS Council the appropriate forum to discuss competition policy regarding pricing of medicines and health technologies. There are other international fora, such as the International Competition Network, where such international exchanges and cooperation are taking place. (Ibid, Page 69)
628. While the submission from South Africa seems to consider the use of competition policy a TRIPS flexibility, the EU would be cautious. While TRIPS is obviously compatible with the application of competition policy measures, it clearly does not allow for an “absolute policy space”. As provided for in Articles 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. (Ibid)
629. Generally, competition policy plays an important role in controlling and sanctioning anticompetitive market behaviour in any sector, including the pharmaceutical sector. (Ibid)
630. The examples concerning excessive pricing as a competition law infringement in the pharmaceutical sector in the EU show that competition law enforcement in the EU is done on a case by-case basis. (Ibid, Page 70)
The European Union response on transparency reminded the TRIPS Council that the EU and its Members contributed EUR 19 billion from 2001-2016 to the Global Fund.
South Africa re-entered the fray to remind the European Union of the subject at hand (and the positions expressed by several EU member states on transparency at the World Health Assembly in May 2019).
705. I would like to point out that this particular item does not deal with competition policy as such. It deals with price transparency and so is different in emphasis. I believe that in respect of the UN High Level Panel Report we disagree that the panel’s mandate was narrowly focused on the issues that both the European Union and the US point out. We note that some of the EU member States have taken different views on the issue including in the World Health Organization related to transparency of medicine prices. (Ibid, Page 76)
In its endeavor to make a contribution germane to the discussions, the European Union noted:
714. When it comes to transparency of the cost of medicines members of the European Unionand the EU would agree that we have to provide guaranties and we have to work together so we can boost transparency in the marketplace.But the actual cost of producing medicines is relatively low or basically zero in some cases. (Ibid, Page 77)
716.If we look at the procedure for bringing to market,clinical and pre-clinical tests can take years. Public funding differs between EU Members and differs around the world. Everyone knows that such help,subsidies which vary,are quite often part of the pricing. (Ibid, Page 78)
The European Union provided these final remarks lest experts and scholars doubt that the European Union was confused (between the subject of IP and competition policy on the one hand, and and the transparency of R&D costs and the pricing medicines, on the other).
719. We do not think in the EU that we confuse competition policy with this. In the EU,within a single market,competition in the pharmaceutical sector is treated in the same way as for any other sector. We recognize the actual cost of the medicine is something which is very delicate. I did not want you to be confused and let South Africa’s communication say what it does not. (Ibid).
The World Health Organization provided the following perspective on the transparency negotiations at the World Health Assembly in May 2019.
711. During the last World Health Assembly in May 2019, WHO members, “Seriously concerned about high prices for some health products, and inequitable access to such products within and among Members, as well as the financial hardship associated with high prices which impede progress towards achieving universal health coverage”, approved the so-called “Transparency Resolution”, WHA72.8, co-sponsored jointly by more than 20 developed and developing countries (including South Africa), on improving the transparency of markets for medicines, vaccines, and other health products.The Resolution recognizes “that the type of information publicly available on data across the value chain of health products,including prices effectively paid by different actors and costs, vary among Members and that the availability of comparable price information may facilitate efforts towards affordable equitable access to health products”. The Transparency Resolution urges members, inter alia, to share information on net prices of health products as well as on costs from human subject clinical trials; to facilitate improved public reporting of patent status information and the marketing approval status of health products; and to improve national capacities, including through international cooperation and open and collaborative R&D and production of health products in particular in LMICS. (Ibid, Page 77)