[Ip-health] WTO TRIPS Council: South Africa asks WTO members to share best practices to address excessive prices

Thiru Balasubramaniam thiru at keionline.org
Mon Oct 29 10:56:39 PDT 2018


WTO TRIPS Council: South Africa asks WTO members to share best practices to
address excessive prices

Posted on October 29, 2018 by Thiru

On 29 October 2018, the World Trade Organization (WTO) published a
submission (IP/C/W/649) by South Africa to the TRIPS Council on Promoting
Public Health Through Competition Law and Policy. This paper is a follow up
to a joint submission by South Africa, China, Brazil and India
<https://www.keionline.org/27930> in May 2018 on the ad hoc item,
Intellectual Property and the Public Interest: Promoting Public Health
Through Competition Law and Policy.

In making the case for the further treatment of competition law and policy
at the TRIPS Council, the South African paper notes:

   It is also apparent that clearer competition policy treatment of IPRs
   has evolved overtime through either iterative processes or evolving
   practice of competition authorities. This evolution is informed by
   jurisdictional cross-fertilization and peer learning as evidenced by
   greater interest in and concerns with ensuring an appropriate balance
   between IP and competition law and policy in these jurisdictions. This
   development underscores the need for further debate and analysis since
   competition law and policy is no longer the preoccupation of only a few

   As a consequence of accommodating the variety of potential competition
   approaches, remedies available to address anti-competitive behaviour may
   permit a broader range of remedial action than some other public
   health-related flexibilities associated solely with patents. Competition
   policy has an important role to play in ensuring access to medical
   technology and fostering innovation in the pharmaceutical sector. (Source:

South Africa’s submission highlights the rich diversity in the application
of competition law to remedy anti-competitive practices. The paper notes:

Since a substantial body of precedent exist, the sponsor of this document
wishes to demonstrate that many WTO Members already use competition law to
address various anti-competitive practices that affect access to medicines
and medical technologies. Practices that have been identified as
detrimental include, but are not limited to the following instances: (i)
abuses of IPRs due to a refusal to deal with or imposition of overly
restrictive conditions in medical technology licensing; (ii) preventing
generic competition through anti-competitive patent settlement agreements;
(iii) mergers between pharmaceutical companies that lead to undesirable
concentration of research and development and IPRs; (iv) cartel agreements
between pharmaceutical companies, including between manufacturers of
generics; (v) anti-competitive behaviour in the medical retail and other
related sectors; and (vi) bid rigging in public procurement. In this
respect, not all jurisdictions follow the same approach, for instance,
refusal to license may amount to an abuse of dominance in some
jurisdictions while others consider this within the rights of IPR holders.
(Source: Ibid)

In relation to the interpretation of the TRIPS Agreement, South Africa
references the WTO panel in Australia – Tobacco Plain Packaging stating
that the Panel

noted that paragraph 5 of the Doha Declaration is formulated in general
terms, thereby inviting the interpreter of the TRIPS Agreement to read
“each provision of the TRIPS Agreement”in light of the object and purpose
of the Agreement, as expressed in particular in its objectives and
principles. Fundamentally, the panel concludes that paragraph 5 of the Doha
Declaration constitutes a subsequent agreement of WTO Members within the
meaning of Article 31(3)(a) of the Vienna Convention on the Law of
Treaties. This finding may have important consequences for how
flexibilities in the TRIPS Agreement are interpreted. (Source: Ibid)

South Africa proposed the following set of guiding questions to advance the
TRIPS Council’s discussions on competition law and policy to achieve public
health outcomes.

(1) What types of behaviours do WTO Members consider abuses of intellectual
property rights in the pharmaceutical and medical sectors? Has there been
any evolution in the approaches that WTO Members take to assess such types
of behaviours?

2) What examples of best practice can Members identify on the subject of
the control and remedies for excessive pricing? Are there context-specific
methodologies employed by Members for determining if prices are excessive,
and the mechanisms to remedy and control pricing abuse?

(3) What examples of best practice can be identified through national
competition laws and practices? Are there certain common trends that can be
identified across various jurisdictions?

(4) To what extent can technical assistance and capacity building
contribute to the delivery of more effective policies by WTO Members in the
field of competition law to address the abuse of intellectual property

One can expect South Africa’s second submission on “competition law and
policy to achieve public health outcomes” to generate a robust debate at
the upcoming TRIPS Council on 8-9 November 2018 based on the intense
discussions of this subject at the June 2018 TRIPS Council. The full text
of South Africa’s October 2018 submission on competition can be found here

At the June 2018 session of the TRIPS Council, the United States said:

   The cosponsors also invoke the 2030 Agenda for Sustainable Development,
   in particular Sustainable Development Goal 3. It is important to note that
   nowhere in the 2030 Agenda is competition law or policy prescribed as a way
   to achieve the SDG targets. In fact, misapplication of competition law to
   IP cases could make it more difficult to achieve certain goals, such as
   ending communicable diseases, promoting newborn and infant health, and
   supporting the research and development of vaccines and medicines as we do
   not currently have all of the health technologies needed to fully address
   these challenges.

   The competition issues raised in the submission, such as liability for
   excessive pricing and the use of compulsory licensing remedies, have been
   debated in more competition-focused international organizations such as the
   OECD and the International Competition Network (ICN). As these raise
   competition, not IP issues, those are more appropriate venues than the
   TRIPS Council to address such issues.

   The United States does not regulate “excessive pricing” under US
   antitrust law and we have encouraged jurisdictions that have excessive
   pricing laws to refrain from applying them to IP rights, which are designed
   to promote innovation through, among other things, investment in R&D.
   Antitrust enforcers who impose liability for pricing “too high” may deter
   R&D investment because they supplant market-based forces with an artificial

   We believe it is also important to consider that it is not illegal
   merely to have market power or a monopoly; many monopolists obtained their
   position by creating better, cheaper, more attractive products. This system
   promotes innovation because it incentivizes first-entrants to develop the
   best product. It also creates incentives for rivals or new entrants drawn
   by the lure of large rewards. (Source: Minutes of Meeting Held in the
   Centre William Rappard on 5-6 June 2018, IP/C/M/89/Add.1, 13 September

The European Union provided the following perspective
<https://www.keionline.org/28090> in June 2018:

   While there are a number issues in the Communication the EU disagrees
   with, we would like to particularly voice concern over the mentioning of
   “refining the criteria for grant of a patent (patentability criteria)” as a
   TRIPS flexibility. The TRIPS agreement is very clear and unambiguous on
   patentability criteria. TRIPS Article 27 (1) states very unmistakably that:
   “patents shall be available for any inventions, whether products or
   processes, in all fields of technology, provided that they are new, involve
   an inventive step and are capable of industrial application.” We see with
   growing concern that misinterpretation of this Article has led many
   jurisdictions to apply practices in the patent grant process which could be
   interpreted as amounting to additional patentability criteria not mentioned
   in the TRIPS agreement. The EU urges those Members to reconsider their

   In the general, the EU would also be cautious to consider the use of
   competition policy a TRIPS flexibility. Without doubt, the TRIPS agreement
   is compatible with the application of competition policy measures. However,
   as clearly 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

   Compulsory licences to pharmaceutical patents as a remedy to excessive
   pricing would have a negative impact on innovation incentives and appear to
   be superfluous, because a competition authority, once it has established
   unlawful market behaviour, has the normal toolbox of competition policy

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

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