NGOs disappointed with WHO-WTO workshop on drug pricing

THE WHO-WTO workshop on ‘Affordable medicines for poor countries’ held in Norway in April was a response to the growing campaign of public interest NGOs of the North and the South about the mounting evidence of a runaway global monopoly intellectual property system in the WTO that is curbing the rights of national governments without countervailing international state power or resources to offset the welfare losses of the poor.

While the campaigns of civil society have raised issues of the legitimacy and locale within the trade system of the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the workshop addressed only a narrow range of issues relating to the cost of medicines for the poor countries, ‘differential pricing’ for different users and consumers (i.e., the charging of lower prices in poorer countries), and financing of medicines (for health-care) in these countries.

Trade diplomats (though not often in public) and observers from the Third World view the WTO secretariat, and more so its TRIPS division, as biased towards the interests of the developed countries and corporate interests.

According to the WTO and WHO press releases before the conference, the purpose of the meeting was to discuss ‘differential pricing and financing’ of essential drugs - in effect focussing it on the parameters acceptable to the transnational pharmaceutical firms and their global monopolies.

The WTO secretariat’s background note written for the meeting  - on differential pricing and how to achieve it, including by restrictions to prevent ‘leakage’ of products from low-priced to high-priced markets - reflected the  approach of the drug companies and inevitably led to discussions about which the NGOs have complained.

The meeting was held, in relative isolation from critical media or others, at Hosbjor in Norway. A final press conference on a telephone hook-up connecting about a dozen centres in North America and Europe involved seven participants, including a representative of Medecins Sans Frontieres (MSF) but none from a developing country. The telephone hook-up itself was technically so bad that the questions and answers were often difficult to follow; in any event, there was little scope for questions from those who were familiar with the trade rules.

As the joint NGO statement at the end of the workshop put it, the workshop had been held to discuss ‘whether’ differential pricing of essential drugs ‘could’ be used as a tool to expand access in developing countries while preserving incentives for future drug development.

Differential pricing, the NGOs felt, could be a crucial tool to help broaden access to affordable medicines in developing countries, but such a mechanism ‘cannot come with onerous conditions attached, such as forcing poor countries to surrender their rights guaranteed under the TRIPS Agreement.’

The five international non-governmental groups, Consumer Project on Technology (CPT), Health Action International (HAI), MSF, Oxfam and Treatment Action Group (TAG), viewed the workshop as having provided a new forum for health and trade experts to come together on eliminating trade barriers to long-term affordable drug prices, but expressed their deep disappointment that no progress had been made in bringing the prices down.

The NGO statement said: ‘After 2-1/2 days of discussion, not a single company disclosed plans to actually implement differential pricing for their drugs. Current offers for AIDS drugs are ad hoc, inadequate, and still far below the prices that can be obtained from generic manufacturers.’

Added the statement, quoting Jamie Love of the CPT: ‘It is ironic that in a meeting organised to help the poor, the main drug company proposals were to increase intellectual property protection and ask for the elimination of national price controls. At one point, Oxfam actually offered to give the industry a grant, since they were pleading poverty.’

Besides the WHO and the WTO, two other sponsors of the workshop were the US-based Global Health Council - which the WTO described in its press release as a ‘broad-based US organisation in the healthcare field’ - and the Norwegian government that hosted the meeting. The WTO said that some 80 experts participated. The list showed that there were some 59 (from academia, industry, governments, health care groups and NGOs). The rest were officials from the WHO, WTO, the Global Health Council and the Norwegian government.

At the end of the workshop, the WHO Director-General, Dr. Gro Harlem Brundtland, and the Director of the  WTO secretariat’s TRIPS division, Adrian Otten, summed up in closing remarks their own personal (and organisational) assessments and perhaps outlooks.

Brundtland spoke of the issues addressed at the workshop as ‘essentially political, requiring political solutions, through political processes.’

‘We need to be sure we have all the evidence that is available, but there are no technical right answers to most of the things we have been discussing,’ she added.

Otten felt encouraged by what he saw as ‘a large measure of common feeling among participants’ on the central issues of differential pricing and financing. In his view, the ‘common feeling’ that emerged was on the following:

·        firstly, 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 research and development (R&D) into new drugs;

·        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 the poorest countries will require a major financing effort both to buy the drugs and to reinforce healthcare supply systems, and that for these countries, most of the additional financing will have to come from the international community.

Otten’s statement at the end also said that there had been ‘a fair amount of discussion’ about the TRIPS Agreement and this showed ‘a recognition of the importance of respecting the balance that was found in the negotiations’ on the agreement and the right of developing countries to use the flexibility in it to respond to health concerns. The focus of much of this discussion, according to him, was on how developing countries were able to effectively take advantage of the flexibility for health purposes.

The WTO official added 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 neglected diseases of the poor, and that it needs to be supplemented with additional measures of support.’

In the discussion on ways to make differential pricing effective, the options that came up 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.’

Otten hastened to add: ‘Certainly, no conclusion was reached as to the respective pros and cons of these or other options ... but 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.’

Among the points listed by Otten relating to the views on these options were:

·        making drugs 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 questions were raised as to how this price should be determined and reached.

·        as for how intermediate or middle-income countries should be treated in this regard, the view was expressed that the intermediate countries should pay a price proportionate to their level of income.

·        another issue touched upon but not explored in depth was how the well-to-do segments in developing countries should be treated, and whether it would be feasible to separate their markets from those of the poor in those countries.

According to Otten, there was also a general view that the diversion of preferentially priced products from those for whom they are intended to the  markets of Europe, North America and Japan can and should be avoided.

There were many issues raised on these which he thought needed further study - marketing strategies, control of distribution chain by purchasing entity, role of regulatory authorities in developed countries to prevent imports of products produced under a voluntary licence, and export controls to prevent parallel imports.

Need for greater competition

Judged by the NGO statement, however, clearly the views and points that the WTO official discussed as having emerged have not been shared by the public interest NGOs.

Their statement said that in their view, ‘one proven effective way to bring prices down is to increase competition by encouraging generic competition.’

On differential pricing, the NGOs said they felt it could be a crucial tool to help broaden access to affordable medicines in developing countries, but that ‘differential pricing cannot come with onerous conditions attached, such as forcing poor countries to surrender their rights guaranteed under the TRIPS Agreement.’

‘Mix of mutually supportive strategies’

‘Besides differential pricing,’ said the NGOs, ‘other tools - such as voluntary licensing, compulsory licensing, and parallel importing - are available to help broader access to affordable medicines.’

In their statement on the way forward for ‘global access to essential medicines’, the NGOs said they had made a series of recommendations to enhance R&D and to ensure that intellectual property right protection serves public health needs rather than the reverse.

‘There is no single solution,’ the NGOs said, ‘rather a mix of mutually supportive strategies will be required to assure dramatically reduced drug prices in developing countries.’

And policies to achieve this goal, they said, should be sustainable and not be solely based on charity or donations, and should strengthen the autonomy of developing countries.

The policies should attract donor funding and include all essential medicines and not be limited to drugs for HIV/AIDS and related conditions only.

Only greater competitiveness would help lower drug prices, the NGOs said.

At the meeting, they said, Ellen ‘t Hoen for MSF suggested equity pricing strategies should not depend solely on voluntary offers by the multinational drug firms.

‘Hitherto, most drug companies have preferred low-volume-high-price strategies. Equity or differential pricing should be combined with mechanisms to increase competition and encourage sustainable approaches. For example, it should not have a negative effect on the development of a generic industry in the South.’

The MSF representative told the meeting that one proven effective way to decrease drug prices was to increase competition. In Brazil, prices of certain anti-retroviral, anti-HIV drugs came down by 82% within five years after the country initiated local production and provided universal free HIV treatment to Brazilians who needed it.

And recent offers from generic producers, MSF said, have sparked a price war for anti-retrovirals and have brought the annual price for triple therapy down from $10,000 to $350 in a single year.

The need for competitive markets will require flexibility in implementation and a pro-public health interpretation of the TRIPS Agreement, the NGOs said.

Global procurement strategies and funding should include measures to increase and upgrade generic production in the South. Voluntary licensing and compulsory licensing could help increase the number of generic producers in the market. Voluntary licensing agreements had the added advantage of effectively dealing with the fear of companies that low-priced drugs in developing countries might flow back into high-income markets.

Calling for a new global convention on R&D designed to strengthen both public and private sector research, the NGOs said: ‘At every gathering to discuss access to medicines, the big pharma companies raise the spectre that any effort to help the poor will harm R&D. Some claim proposals to lower drug prices in developing countries, including use of compulsory licensing on essential medicines, may lower their profits. The big pharma solution to R&D is to provide high levels of protection and high prices. But the idea behind a global convention is to create a new mechanism to boost global R&D funding in ways consistent with access to medicines and health needs by encouraging research on neglected diseases.  Country support for R&D funding could take a variety of ways, including publicly funded R&D and mandatory R&D requirements for companies.’                                                           

The above article first appeared in the South-North Development Monitor (SUNS - issue no. 4876), of which Chakravarthi Raghavan is the Chief Editor.