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TWN Info Service on Intellectual Property Issues (May18/02)
22 May 2018
Third World Network

WHO: Proposed work program on “fair price” undermines affordability of medicines

Geneva, 21 May (K M Gopakumar) – The proposed work program on fair price raises concerns on affordability of medicines.

The document was prepared by the Secretariat of the World Health Organization (WHO)for the consideration of the 71st World Health Assembly (WHA) proposes the activity under the agenda item addressing the global shortage of and access to medicines and vaccines (A 71/12).

(http://apps.who.int/gb/ebwha/pdf_files/WHA71/A71_12-en.pdf)

The 71stWHA is taking place from 21 to 26 May at the WHO headquarters in Geneva.

Paragraph 56 of the document states: “There is a need to establish a fair-pricing model that ensures sustainability for health systems and access for patients as well as sufficient profit for industry to sustain the production of quality products”.

The document defines “fair price” as “one that is affordable for health systems and patients and that at the same time provides sufficient market incentive for industry to invest in innovation and the production of medicines. In this context, fairness implies positive incentives/benefits for all stakeholders, including purchasers and those involved in the research and development and manufacture of medicines”.

As per the definition, fair price is different from affordable price and it is a price reached taking into consideration the market incentive for industry to invest in innovation and the production of medicines. Thus the definition in effect means that prices of the medicines should not be as low as are currently available due to generic competition;instead it should compensate those involved in the research and development and manufacture of medicines.

There is ample evidence that generic competition brings down the prices of medicines drastically. For instance, though the price of Gilead Sciences’ sofosubuvir price for 12 weeks of hepatitis C treatment is USD 84000 in the United States,the company offered the medicine to a few developing countries for USD 900, almost 90% less than the USmarket price. However, generic competition could bring down the price to below USD 100.  The fair price initiative thus underminesgeneric competition that can be increased though the use of flexibilities in the Trade-related Aspects of Intellectual Property Rights Agreement (TRIPS) such as compulsory license and government use license. The fair price initiative could legitimise high prices.

Most importantly, it raises the question of fairness for whom? To date there is no transparency with regard to the actual cost of research and development (R&D). The cost of R&D is not open for public scrutiny and verification. The opaqueness around R&D cost has been long used to justify high, even exorbitant, prices for patented medicines. The fair price to provide incentives for innovation would then legitimise the high prices for medicines and compromise access to medicines in many WHO Member States.

Paragraph53 of the report states: “The Secretariat has started collecting evidence for a fair pricing model that could be adapted by countries according to the national context”. However, there is no governing body decision to start a work program on fair price.

Third World Network has learnt that the WHO Secretariat initiated the work in 2016 through a staff of the Swiss Patent Office to work from the WHO headquarters. Further, the Secretariat also commissioned nearly 13 to 14 papers on various aspects of pricing of medicines, including a concept paper on fair pricing. The paper deals with various elements of fair pricing, such as cost of manufacturing, cost of R&D, fair profit, registration costs, financial strain on the buyer etc., and concludes: “None of these provides adequate guidance on establishing a fair price of a particular medicine, but by setting boundaries on what could be considered affordable they may offer food for thought on what is not a fair price for a society to bear”.

The Secretariat also held a one-day fair pricing forum on 11 May 2017. The report of the fair pricing forum states: “There is a need for further discussion, in order to find solutions to the many different facets of the prices/access issue, to develop a constructive and concrete action plan that can be implemented”. (http://apps.who.int/medicinedocs/documents/s23269en/s23269en.pdf)

The attempt to introduce the concept of fair pricing and a work program on fair pricing resembles the attempt to introduce differential pricing in the early years of the last decade to curb generic competition through the use of TRIPS flexibilities.

The WHA is expected to adopt the following decision points agreed at the 142nd meeting of the Executive Board in January 2018:

·         To elaborate a roadmap report, in consultation with Member States, outlining the programming of WHO’s work on access to medicines and vaccines, including activities, actions and deliverables for the period 2019−2023;

·         To submit this roadmap report to the Seventy-second World Health Assembly for its consideration in 2019, through the Executive Board at its 144th session.

(For details see http://apps.who.int/gb/ebwha/pdf_files/EB142/B142(3)-en.pdf)

 


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