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TRIPS: WHO/WTO WORKSHOP ON DIFFERENTIAL PRICING AND FINANCING OF ESSENTIAL DRUGS, HØSBJØR 2001
Closing remarks: Adrian Otten

Høsbjør, Norway, 8th–11th April 2001
Adrian Otten
WTO Secretariat

Closing remarks

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Opening remarks: Gro Harlem Brundtland
Introductory remarks: Adrian Otten
Closing remarks: Gro Harlem Brundtland

Some points that struck me in the discussion:
Not a summary, let alone a conclusion.
Non-exhaustive

1. The first point that I would like to make is that I think the holding of this meeting was itself important. This is partly because it reflects a recognition of the importance of the issues of differential pricing and financing of access to essential drugs, partly because it represent a recognition of the need to look at them from both a health and trade policy angles and partly because of the wide spectrum of interests and perspectives that have come together for these two and a half days of discussion.

2. I believe that this diversity has contributed to the richness of the discussions. As I mentioned at the outset of the workshop, our main aim was to contribute towards a better understanding of the often complex issues that these two subjects give rise to. To our way of thinking, the workshop has met this goal, even if the number of questions identified exceeds the number answered. But I detected a general willingness to pursue these questions further in a purposeful and constructive way.

3. The two main topics for discussion were differential pricing and financing. I was encouraged by what seemed to be a large measure of common feeling among participants on these central points.

a. First, differential pricing could and should play an important role in ensuring access to existing essential drugs at affordable prices, especially in the poorest countries, while allowing the patent system to continue to play its role of providing incentives for R&D into new drugs.

b. Secondly, it seemed that there is a general view that, while affordable prices are important, actually getting drugs, whether patented or generic, to the people who need them in poorest countries will require a major financing effort, both to buy the drugs and to reinforce health care supply systems, and that, for these countries, most of the additional financing will have to come from the international community.

4. There was a fair amount of discussion about the TRIPS Agreement. This showed a recognition of the importance of respecting the balance that was found in the negotiation of this Agreement and of the right of developing countries to use the flexibility in it to respond to health concerns. The focus of much of this discussion was how to ensure that, in their implementation of this Agreement, developing countries were able to effectively take advantage of this flexibility for health purposes. I should also add that there seemed to be wide acceptance of the view that the patent system, while a necessary condition for much R&D, was not a sufficient one to secure adequate R&D into the neglected diseases of the poor; and that it needs, in this respect, to be supplemented with additional measures of support.

5. We discussed the ways in which differential pricing should be made effective. Options advanced ranged from creating the right conditions and leaving it to the market, through bilateral negotiated discounts and the use of non-exclusive voluntary licences, to global procurement and distribution systems. Certainly, no conclusion was reached as to the respective pros and cons of these or other options, but I think we all came out with a better understanding of the options, and there seemed to be a view that it might be necessary for more than one of them to be used, depending on the circumstances.

6. In relation to these options, I would like to recall, in particular, a number of points:

  • Many participants were of the view that drugs should be made available to the poorest at a price as close as possible to the marginal cost of production, or even lower under donations or where incentives are provided. But the question was raised of how this price should be determined and reached. This issue was viewed from the angles both of developing country buyers and of developed country donors, who would want to be sure that products are being made available at the lowest possible price if large amounts of development funding is to be allocated for this purpose. Responses to this question included negotiation, calculating its potential cost of production in local factories, and use of voluntary licensing and eventually compulsory licensing or its possibility.
  • Another issue that emerged was that of competition or anti-trust law. It was explained that under present national competition law in many jurisdictions with such laws, agreements between companies on how they compete are a per se offence, sometimes criminal in nature. It is often not a defence that the purpose of the agreement is to promote the public good. However, it was also explained that competition law would not stand in the way of a company engaging in international price differentiation through actions independent of other companies and not as part of any concerted arrangement with them. It was also emphasized that competition law did not prevent discussion of public policy issues, as well as any consequential governmental action.
  • Another aspect that came up is the role of monopsony or bulk purchasing power, in securing favourable prices. This appears to be an important element in present international arrangements in the fields of vaccines and contraceptives where very favourable discounted prices are obtained, including for non-patented products. While the link between volume and prices appears powerful, there was also a concern that arrangements should be such that eligibility for lower prices should be related to capacity to pay, not to the size of the market.
  • Another issue that arose was the treatment of the intermediate (middle income) countries. While the discussion about the poorest developing countries generally took place on the basis of the notion that they should be eligible for prices as close as possible to the marginal cost of production, the view was expressed that the intermediate countries should pay a price proportionate to their level of income.
  • Another issue that was touched upon but not explored in depth is that of the well-to-do segments in developing countries. The question raised is: would their eligibility for differential prices affect significantly its likelihood and, if so, would it be feasible to separate their markets from those of the poor in those countries?

7. There was a general view that the diversion of preferentially priced products from those for whom they are intended, particularly to the markets of Europe, North America and Japan should and can be avoided. We had a good discussion of how this should be done, but my sense is that there are many issues that merit further study. Clearly, marketing strategies relating to the presentation of products and the role of trademarks can play a role. So can careful control of the distribution chain by the purchasing entity. The role that the regulatory authorities in the developed countries can play, particularly to prevent imports of products produced under a voluntary license, was discussed. So was the role of export controls and that of intellectual property based rights to prevent parallel imports, at least in the developed countries. On the face of it, all these techniques appeared to have their advantages but also limitations. It may be that a variety of them will need to have a place, depending on the circumstances.

8. There was also, I believe, a common view that preferential prices in developing counties should not be a factor in pricing in the developed countries. Such prices should not be used as references in developed country reference pricing systems. A more difficult point was how to forestall differential prices being exploited in the political process in developed countries. This will require political leadership, advocacy efforts and public education. Part of this will be the need to reassure public opinion that lower prices in poor countries do not mean higher prices in rich ones or greater burden on national security budgets.

9. The scope for differential pricing for generic as well as patented products was touched upon. Judging by experience with vaccines and contraceptives, it seems that this should not be underestimated. Of course, the alternative strategies of encouraging greater competition and more effective national purchasing are also important.

10. A final point that I would like to mention that was touched upon, but which I believe warrants further exploration, is that of incentives for differential pricing and donations and possible need for greater for international cooperation in this regard.

11. I mentioned at the outset of this workshop that our hope was that it would lead to a better understanding of the issues and that this would enable the various actors — whether government, the international community, industry (both research-based and generic) or civil society — to refine their thinking and to decide on what further action they would wish to take. I believe that the workshop has fulfilled this goal. As for the WTO, as I mentioned earlier, the report of this meeting will be made available to the WTO Council for TRIPS when it has a special discussion on the issue of access to drugs at its next meeting, to be held in June.