[Ip-health] TRIPS Council: Statement of the European Union on Intellectual Property and the Public Interest: Promoting Public Health Through Competition Law and Policy

Thiru Balasubramaniam thiru at keionline.org
Thu Feb 14 06:27:41 PST 2019


https://www.keionline.org/29707

TRIPS Council: Statement of the European Union on Intellectual Property and
the Public Interest: Promoting Public Health Through Competition Law and
Policy
Posted on February 14, 2019 <https://www.keionline.org/29707> by Thiru
<https://www.keionline.org/author/thiru>

On Wednesday, 13 February 2019, the European Union (EU) delivered the
following statement on intellectual property and competition policy at the
WTO TRIPS Council under agenda item 12 on Intellectual Property and the
Public Interest: Promoting Public Health Through Competition Law and Policy.

In relation to excessive pricing, the European Union stated:

However, competition authorities in the EU have been generally reticent to
address possible excessive pricing conduct. In a market economy, prices and
profits are generally regarded as useful indicators and necessary
incentives for other firms to decide where to invest, enter a certain
market or expand their business. Lastly, if high profits are the result of
a firm’s own excellence and innovativeness, the incentive for such efforts
should not be undermined by ex-post competition policy enforcement. While
these reasons, which justify a cautious policy, are generally well
understood, TFEU Article 102 has an explicit abuse prohibition of excessive
pricing, which has been further developed by the European Court of Justice.

However, in the EU, there were no competition cases of excessive prices
related to intellectual property rights. EU authorities, including the
Commission, have so far intervened in cases where, due to market failure,
older, off-patent drugs saw their prices increase by up to over 2000%. In
these cases, i.e. drugs which were no longer protected by intellectual
property rights, high prices were not related to intellectual property
rights and did not act as an incentive for innovation, which intellectual
property rights aim at safeguarding. Conversely, the European Commission
has never reached the conclusion that the pricing of an innovative medicine
was excessive.

The full text of the EU intervention, as delivered, can be found below.
------------------------------

Intellectual property and the public interest

EU intervention:

Competition law and intellectual property systems are not contradictory,
but complementary systems of law, which both strive to further welfare and
growth. As already stated at the last two TRIPS Council sessions, in
general, we do not consider the TRIPS Council the appropriate forum to
discuss competition policy. There are other international fora, such as the
International Competition Network, where such international exchanges and
cooperation are taking place and we invite all WTO members’ competition
authorities to participate in those fora.

While the submission from South Africa seems to consider the use of
competition policy a TRIPS flexibility to facilitate the market entry of
generic competitors, the EU would be cautious and would emphasise the
following: while the TRIPS agreement is obviously compatible with the
application of competition policy measures, it clearly does not allow for
“absolute policy space”. As provided for in Article 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.

Generally, of course, competition policy plays an important role in
controlling and sanctioning anti-competitive market behaviour in any
sector, including the pharmaceutical sector.

However, competition authorities in the EU have been generally reticent to
address possible excessive pricing conduct. In a market economy, prices and
profits are generally regarded as useful indicators and necessary
incentives for other firms to decide where to invest, enter a certain
market or expand their business. Lastly, if high profits are the result of
a firm’s own excellence and innovativeness, the incentive for such efforts
should not be undermined by ex-post competition policy enforcement. While
these reasons, which justify a cautious policy, are generally well
understood, TFEU Article 102 has an explicit abuse prohibition of excessive
pricing, which has been further developed by the European Court of Justice.

However, in the EU, there were no competition cases of excessive prices
related to intellectual property rights. EU authorities, including the
Commission, have so far intervened in cases where, due to market failure,
older, off-patent drugs saw their prices increase by up to over 2000%. In
these cases, i.e. drugs which were no longer protected by intellectual
property rights, high prices were not related to intellectual property
rights and did not act as an incentive for innovation, which intellectual
property rights aim at safeguarding. Conversely, the European Commission
has never reached the conclusion that the pricing of an innovative medicine
was excessive.

Moreover, competition enforcement should not only safeguard static price
competition, but also be mindful of the need to secure dynamic competition
for the development of new, innovative drugs. Both the Commission’s recent
Report on Competition Enforcement in the Pharmaceutical Sector as well as
the Commission’s Sector Inquiry recognize the value that systemic
protection of intellectual property rights together with the other
incentives on the pharmaceutical markets (e.g. incentives for development
of orphan medicines) bring by stimulating innovation and increasing choice
for the patients. They also recognize that many legitimate practices of the
pharmaceutical companies rely on the intellectual property framework (e.g.
patent strategies, patent litigations and settlements, patent oppositions).

Abusive conduct of pharmaceutical companies, as any other abusive
practices, can violate competition law in certain clearly defined
circumstances, and provided that all applicable legal requirements are met.
The Report and the reported cases that include intellectual property
elements clearly underscore that it is not the IPR system as such that is
problematic. In fact, it is to the opposite, competition issues originate
from the unlawful conduct of pharmaceutical companies, which go against the
objectives of the IPR system, for example, fraud on the patent office,
vexatious litigation, or pay for delay settlement of patent disputes.
European authorities have prosecuted a number of such cases, notably
AstraZeneca, Lundbeck, Servier, Pfizer, Boehringer / Almirall etc, all
summarised in the report.

The Commission believes that vigilant enforcement is needed to prevent
abusive anti-competitive practices in all sectors, including the
pharmaceutical sector. To that end, EU competition authorities have the
normal toolbox of competition policy remedies, in particular monetary fines.

However, it cannot be inferred that patenting, patent litigation or other
IP related conduct is generally problematic from the competition law
perspective.

On the international level, the EU effectively cooperates with other
national authorities, including many WTO Members, on competition policy and
enforcement issues of mutual interest. EU cooperation with competition
authorities takes place at two levels. First, the Commission discusses
competition-related matters in various international fora, such as the
International Competition Network (ICN), where excessive pricing was
discussed during its annual conference in Portugal in 2017. ICN is an
effective forum with a broad expert outreach, and brings together
competition authorities from more than 100 jurisdictions, which exchange
experiences and best practices in several meetings every year. Second, the
Commission is also regularly engaged in bilateral cooperation, including in
the pharmaceutical sector. The nature of the cooperation activity varies
between countries and can cover cooperation on specific investigations,
dialogue on competition policy issues as well as capacity building support.

Therefore, we remain to be convinced about the added value of discussing
competition policy here at the TRIPS Council.


-- 
Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International
41 22 791 6727
thiru at keionline.org


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