Medicines for developing countries

Today the European Commission cleared a plan to boost developing countries' access to key medicines. It adopted a draft Council regulation enabling exporters to deliver essential medicines at reduced prices to poor countries, while making sure the goods are not diverted back to the European Union. EU Trade Commissioner Pascal Lamy welcomed the decision: "The EU wants to set an example with a practical means of helping poorer countries struggling with public health crises. Vaccines and contraceptives have long been available at affordable prices. Now developed countries need to make an effort with other medicines. I hope other countries will follow suit." He said he hoped EU ministers would move quickly to approve the plan, which targets medicines for the prevention, diagnosis and treatment of HIV/AIDS, tuberculosis and malaria in the poorest countries.

EU Commissioner for Development and Humanitarian Aid, Poul Nielson, stated "I welcome this proposal as a measure which delivers in a tangible, concrete way what we promised in the Programme of Action. We need to substantially increase the supply of tiered-price products so that cheaper medicines reach the poorest patients. This measure should be seen as part of a wider plan to improve the health situation in developing countries."

Under the plan adopted today producers will be able to significantly increase supplies of medicines at lower, so-called tiered prices, while keeping higher prices for the same items in the EU. Exporters are invited to put their products on a tiered-price list run by the European Commission. Both patented and generic products could be registered. In order to be added to the list, medicines have to be made available either with a price cut of 80% off the average 'ex factory ' price in OECD countries, or at the cost of production plus 10%. The proposed system is simple and transparent.

The products on the list shall bear a logo allowing customs to easily identify them. Being on this list and bearing the logo will mean that imports of these products into the EU for free circulation, re-exportation, warehousing or trans-shipment will be prohibited.

There are 72 countries concerned, 49 least developed countries, plus 23 other low-income countries, who heavily depend on imports of essential medicines to fight against the main three communicable diseases, HIV/AIDS, tuberculosis and malaria. Most of them cannot produce what they need locally. But pharmaceutical producers in developed countries need stronger measures to make sure discounted products supplied in large volumes do actually reach poor countries they are meant for.

It is expected that the EU Minister will adopt this regulation before the end of 2002.

Background

In February 2001 the European Commission adopted a Programme for Action: Accelerated action on HIV/AIDS, malaria and TB in the context of poverty reduction, establishing a broad and coherent Community response for 2001-2006, to address the global emergency caused by these three major communicable diseases. Today's measure is another building block in this long-term strategy.

The Programme proposes that manufacturers and exporters in the EU offer the lowest possible prices to the poorest developing countries without profits being threatened in the EU. This should build on a volume/price trade-off, enabling the poorest countries to benefit from low prices. Price segmentation between developed country markets and the poorest developing country markets is necessary.

Legislative and regulatory instruments are in place in most developed countries to prevent importation, in certain circumstances, of pharmaceutical products, but these instruments may not be adequate if substantial volumes of strongly discounted pharmaceuticals are sold to the poorest developing country markets. The risk of diversion into high priced markets may increase. Preventive measures should encourage the industry to commit itself to offer essential medicines at tiered prices on a sustainable basis. In future, tiered pricing for the poorest developing countries should no longer be the exception, but the rule.

There are separate discussions underway at the World Trade Organisation involving Trade-Related Intellectual Property rights about the terms under which countries in need of medicines may invoke compulsory licenses to manufacture them. If poorer countries get their medicines via a tiered-pricing system, they should not need to invoke compulsory licenses. If the tiered-pricing system works, it could be extended to more countries and treatments.

Cheap or even free medicines alone are not enough to solve health crises in poor countries. Measures to make drugs available must work in conjunction with other points taken up in the Commission action plan the need for stable, functioning health care systems and better public health awareness via education. The action plan also calls for more research into new treatments for diseases prevalent in poorer countries.

For more information:

http://europa.eu.int/comm/trade/csc/med.htm

Q&A

What's wrong with the existing legal framework?

The current framework doesn't provide producers means to fight the problem at the EU borders. We need a tool to stop these products entering the EU. This measure isn't just for goods protected by intellectual property rights. It's for all products, including generic products, that can help fight the three major diseases.

What does this have to do with intellectual property legislation?

Nothing. This regulation will apply to all products that are offered at tiered prices, whether protected or generic. On the other hand, this measure does not interfere with the intellectual property rights applicable to the medicines as appropriate.

Did you draft this because of recent headlines about Glaxo Smith Kline's problems with cheap drugs for developing countries being resold in the EU?

No this measure is the result of a long term strategy devised by the EU to ensure that poor countries benefit from access to essential medicines and builds on the work that has been going on for the past two years. Obviously the measures proposed today aim at preventing that cases such as the recent one involving GSK recur.

Are other developed countries taking similar action?

Not yet, but we trust that other developed countries will build on our initiative. We hope to discuss this issue further with the US, Canada and Japan as well as in the context of the G8.

Is there any link between this regulation and the TRIPs discussions on enabling developing countries to use of compulsory licences to manufacture the drugs they need?

In principle, no the discussion on compulsory licensing at the WTO TRIPs Council (Agreement on trade related intellectual property rights) is a separate exercise. However, in practice it's clear that if poorer countries get the medicines they need under tiered pricing arrangement, they won't need to use compulsory licenses.

How can customs authorities tell if they're dealing with tiered-price products ?

Products sold to beneficiary countries must be marked with a logo on the product and/or packaging. Manufacturers can also make them look different to those sold on developed markets they can be made in different colours, sizes or shapes, for instance.

Why only three diseases HIV/AIDS, TB, malaria ?

We have to start somewhere and our basis is the Programme for Action. If the system works, we are ready to consider adding other medicines. We can also extend the number of countries we include in the scheme.

What would the impact of this Regulation be on importing developing countries?

We hope it will mean they are able to import more medicines, with immediate effects on the number of people that can be treated. We have partnership agreements with developing countries and hope they will work on setting up effective distribution systems. We also count on the work of NGOs (non-governmental organizations) in this respect.

Why are you proposing a voluntary system?

We can't make manufacturers reduce their prices. But if the industry is encouraged to see the benefits of expanding their markets via the listing procedure, this will lead to manufacturers making use of it and increasing deliveries. This is a give-and-take exercise.

How have you calculated tiered prices ?

We have used two basic formulas but it is clearly up to each producer to decide and chose the option that is most workable for them. One is based on the average price for a product in OECD countries, less at least 80% and another based on direct production costs, plus 10%. According to past experience, producers have been offering price reductions as high as 99% for vaccines and contraceptives.

List of targeted countries

Afghanistan, Angola, Armenia, Azerbaijan, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Cameroon, Cape Verde, Central African Republic, Chad, China, Comoros, Congo, Democratic Republic of Congo, Republic of Djibouti, East Timor, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Ghana, Guinea, Guinea Bissau, Haiti, Honduras, India, Indonesia, Ivory Coast, Kenya, Kiribati, Korea, Democratic Republic of Kyrgyz, Republic of Lao People's Democratic Republic, Lesotho, Liberia, Madagascar, Malawi, Maldives, Mali, Mauritania, Moldova, Mongolia, Mozambique, Myanmar, Nepal, Nicaragua, Niger, Nigeria, Pakistan, Rwanda, Samoa, Sao Tome and Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, Sudan, Tajikistan, Tanzania, United Republic of Togo, Turkmenistan, Tuvalu, Uganda, Vanuatu, Vietnam, Yemen, Zambia, Zimbabwe

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