Drug Pricing Transparency To Be Discussed At World Trade Organization

A request by South Africa to the World Trade Organization (WTO) TRIPS Council to “address the transparency of R&D costs and pricing of medicines and health technologies” is expected to be reviewed Friday, 18 October 2019 as the TRIPS Council meets this week for its third session this year.

The TRIPS Council, the administrative body for the 1995 TRIPS Agreement, will thus become the third international  body to take up the issue of drug pricing, following a landmark resolution by the World Health Assembly (WHA) in May urging countries to adopt transparency policies, followed by a Human Rights Council Resolution in July.

While the discussion at the third annual meeting (17-18 October) is unlikely to have immediate policy impacts, it will highlight the political barriers that countries face in using TRIPS flexibilities, which can involve threats of political repercussions far from the pharma arena.

The request by South Africa is also the latest in a series of moves by individual countries, as well as civil society, to move the transparency agenda further forward following the adoption of a landmark WHA resolution.

The United Kingdom’s Labour Party leader, Jeremy Corbyn, highlighted the high price of Orkambi, a life-saving cystic fibrosis drug, in a speech at his party conference in September, saying that the Labour Party, if elected, would override patent protections for excessively-priced medicines. Civil society watchdog, Observatoire Transparence Médicaments, appeared in front of the French Parliament to discuss a “transparency checklist” – a document that proposes establishing a public database of R&D and drug pricing data from different countries.

And earlier this month, Malta’s deputy prime minister and one of the leaders of the “Valletta Group,” composed of Italy, Malta, and eight other European states. described a new initiative by the group to share drug pricing data in an effort to improve their collective bargaining power to negotiate down prices with pharmaceutical companies.

High-level regional officials have also brought the issue to their forums, with the outgoing European Union Health Commissioner, Vykenis Andriukaitus calling transparency “a priority of the Commission.”

“We need transparency on public investment in R&D and pricing to ensure supply of affordable meds… Public funding should be reflected in the price and be given back in case of launch of successful products,” Andriukaitus said at the European Health Forum (Gastein).

High drug prices have been a major barrier to accessing treatment for many patients in countries of all income levels.

Defendants of the high costs of new medications say that the prices are justified in light of the risks and costs associated with R&D. Yet research and development information, including information about the associated costs, is highly protected, so that the true cost of R&D for many or most drugs remains largely unknown.

The issue is particularly thorny in the debate about drugs where the initial research was carried out in public institutions or subsidized by public grants.

The TRIPS Agreement, a two-decades old global trade agreement, created important categories of exemptions for governments, whereby they could bypass certain patent protections in cases where patents have impeded access to new products, including new essential medicines.

So called “TRIPS flexibilities” allow those governments to issue “compulsory licenses” for local production of patented drugs under certain conditions, parallel importation of patented drugs from generic producers, or other curbs on patent rights, so as to bring down prices. But implementation of these flexibilities has seen mixed results.

Transparency as a Facilitator of TRIPS Implementation

Historically, low- and middle- income countries that have trouble affording costly new medicines for complex chronic conditions or rare diseases such as cancer and cystic fibrosis have pushed forward the transparency agenda. But drug prices have skyrocketed to a point where even high-income countries are now looking for ways to bring down prices.

A researcher tests the efficacy of a generic drug in the United States.

In an Op-Ed published in the Financial Times on 17 October, Suerie Moon, co-director of the Geneva Graduate Institute’s Global Health Centre, pointed to the recent proposals floated in the United Kingdom, the EU and by players on both sides of the US political spectrum as evidence that drug pricing and transparency have become key issues in broader political campaigns.  Her op-ed entitled “There are solutions to the global drug price problem” looks at next steps that countries could take in the wake of the WHA price transparency resolution.

“Italy blazed a trail at the World Health Organization in shaping the passage of the historic transparency resolution (WHA72.8)…At the World Trade Organization, South Africa has crossed the Rubicon in bringing the transparency debate into the halls of the TRIPS Council,” said the Geneva Representative of Knowledge Ecology International (KEI), Thiru Balasubramaniam.

The WTO TRIPS Council is expected to accept South Africa’s request, which “will challenge trade negotiators to provide state practice on measures to enhance the transparency of R&D costs including “information on grants, tax credits or any other public sector subsidies and incentives,” said Balasubramaniam.

In its submission to the TRIPS Council, South Africa said, “The current model of medical innovation [based on patent protections] is ill-equipped to respond to the increasing emergence of infectious diseases, the unprecedented explosion of NCDs and neglected tropical diseases.”

South Africa argues that “abuse of IP rights” is difficult to monitor when there is no “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.”

Quoting the UN Secretary General’s High-level Panel on Access to Medicines, South Africa pointed to the panel’s observation of “transparency as a 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 recent years, the WTO TRIPS Council, the governing body for the TRIPS Agreement, has focused its attention on aspects of intellectual property and innovation including innovation incubators, sports, and university technology partnership. According to Knowledge Ecology International, an intellectual property watchdog, the past few years have seen developing countries such as South Africa, India and Brazil pushing for agenda items to be more related to issues of “public interest.”

Mixed Success In Implementation of TRIPS Flexibilities

WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which entered into force in 1995 attempted to strike a balance between the long term social objective of providing incentives for future inventions, and the short term objective of allowing people to use existing inventions and creations.

But in the case of public health, the adoption of the TRIPS minimum standards resulted into a significant loss of policy flexibilities by developing countries in regulating the granting and use of pharmaceutical patents and controlling the cost of medicines, notes a South Centre assessment.

The Agreement, however, did provide for so called “TRIPS flexibilities” allowing governments to take certain measures to remedy anti-competitive practices and in situations of clear public health needs. These included issuing producers “compulsory licensing” to produce generic versions of patented products or engaging in the “parallel importation” of products when the appropriate patented product was either unavailable or too expensive.

In 2001, the rights of countries to make use of TRIPS flexibilities for public health were reaffirmed under the Doha Declaration on the TRIPS Agreement and Public Health. More recently, a WTO protocol amending the TRIPS Agreement to permit the granting of special compulsory licenses for the export of medicines entered into force on 23 January 2017.

A variety of ARV drugs used to treat HIV infection.

Over the past 15 years, TRIPS flexibilities were a major tool used in health milestones such as the decisions by South Africa, Brazil, and other low- and lower middle income countries to produce and use generic anti-retroviral (ARV) drugs for treatment of HIV/AIDS.

But in lesser profile cases, countries have been less successful in wielding the tools – or reluctant to use them at all because of the inherent political pressures. For instance, countries such as Colombia have been discouraged by the US and Switzerland from issuing a compulsory license for imatinib, an expensive cancer drug for which Novartis, a Swiss company, holds many national patents.

And over two decades on – no authoritative international body has done a truly comprehensive and systematic mapping and assessment of experience with TRIPS – another reason why the South African question to WTO is relevant.

Elaine Ruth Fletcher contributed reporting to this story.

Image Credits: NIAID, WTO, FDA/Michael Ermarth.