IP/C/W/659  
 
4 October 2019  
(19-6437) Page: 1/3 
Council for Trade -Related Aspects of  
Intellectual Property Rights  Original: English  
 
INTELLECTUAL PROPERT Y AND THE PUBLIC INT EREST:  
R&D COSTS AND PRICIN G OF MEDICINES AND H EALTH TECHNOLOGIES  
COMMUNICATION FROM S OUTH AFRICA  
The following communication, dated 3 October 2019, is circulated at the request of the delegation 
of South Africa.   
 
_______________  
 
 
1.  This topic is a continuation of a sustained debate regarding the intersection between intellectual 
property and public i nterest. Public interest is a central component of the of the TRIPS Agreement, 
which recognizes underlying public policy objectives of national systems for the protection of 
intellectual property. The protection and enforcement of intellectual property rig hts is not an end in 
itself. Article 7 of the TRIPS Agreement recognizes that intellectual property rights must contribute 
to the promotion of technological innovation and the transfer and dissemination of technology to the 
advantage of all stakeholders, i ncluding the users of technological knowledge and in a manner 
conducive to social and economic welfare.  
2.  In September 2015, 193 Member States of the United Nations adopted the 2030 Agenda for 
Sustainable Development (2030 Agenda). This agenda includes Sust ainable Development Goal 
(SDG) 3 that aims to ensure healthy lives and promote the well -being of all people of all ages.  
3.  The WTO is central to achieving the 2030 Agenda for Sustainable Development Goals (SDGs), 
which set s targets to be achieved by 2030 in  areas such as poverty reduction. Trade has proven to 
be an engine for development and poverty reduction by boosting growth, particularly in developing 
countries. Target 3.b underscores the importance of support for R&D of vaccines and medicines for 
the co mmunicable and non -communicable diseases that primarily affect developing countries. The 
Doha Declaration on the TRIPS Agreement and Public Health affirms the right of developing countries 
to use to the full the provisions in the TRIPS Agreement regarding flexibilities to protect public health 
and, in particular, provide access to affordable medicines and medical technologies for all.  
4.  The Doha Declaration on the TRIPS Agreement and Public Health recognizes both the importance 
of intellectual property for th e development of new medicines and concerns that intellectual property 
rights affect medicine pricing.  
5.  The UN Secretary General 's High -level Panel on Access to Medicine s1 observed the following: 
"The rules governing human rights, trade and public health ex ist in separate but overlapping 
spheres; their implementation rests at different levels. An important factor behind the incoherence 
between trade, intellectual property laws, human rights and public health lies in the different 
accountability mechanisms an d uneven levels of transparency. " It further observes that 
transparency is a core component of good governance, especially where civil society and patient 
groups rely on transparency of information. Transparency, as further stated, can also ensure fairness  
during negotiations that take place between biomedical companies and procurement organizations.2  
                                                
1 Report of the United Nations Secretary -General’s High -Level Panel on Access to Medicines: Promoting 
innovation and access to health technologies (September 2016) at p. 33.  
2 Ibid. IP/C/W/659  
 
- 2 - 
 
  6.  In this context, Members of the WTO must commit to the full use of the flexibilities in the TRIPS 
Agreement to increase access to affordable, safe, effective  and quality medicines, noting that, 
inter alia, intellectual property rights are important incentives in the development of new health 
products.  
7.  The current model of medical innovation is ill -equipped to respond to the increasing emergence 
of infectious diseases, the unprecedented explosion of NCDs and neglected tropical diseases. For 
developing and least developed countries (increasingly developed countries raise similar concerns) 
affected by inadequate funding for R&D and access to health technologies a nd medicines continue 
to struggle to ensure access to affordable medicine for their citizens. Prevailing high prices of medical 
technologies and medicines ha ve been subject of much debate in the recent past.3 
8.  The Seventeenth World Health Assembly of the Wo rld Health Organi zation (WHO) passed 
Resolution WHA70.12 on 31 May 2019  noting the increasing costs to health systems and patients of 
the introduction of new pharmaceutical products for cancer treatment in recent years. The WHO 
Assembly requested the Direc tor General to prepare a comprehensive technical report to the 
Executive Board at its 144th session that examines pricing approaches, including transparency, and 
their impact on availability and affordability of medicines for the prevention and treatment o f cancer.  
9.  Many WTO Members have implemented national or regional medicines policies to guide and 
coordinate context -specific actions towards achieving long -term goals for the pharmaceutical sector 
and health sector in general. A preponderant component of such frameworks deals with pricing 
policies. Taking into account the broader health system and economic objectives of such frameworks, 
a balance is often sought between an optimal pricing policy to promote the availability and 
affordability of quality, saf e and effective medicines as well as financial sustainability. Transparency 
is a central component that inform s decision -making models within such national frameworks, hence 
adequate disclosure of price information is required. Pricing policies of private companies remain 
opaque and may differ from one company to a nother  which makes it difficult for governments and 
other procurement institutions to accurately gauge prices of medical health technologies and 
pharmaceutical products.  
10.  Pricing strategies are based on determinants such as, inter alia  the cost of R&D, costs of 
production or financial returns to incentivize future R&D programmes. The  true costs of R&D for 
pharmaceuticals are often unknown and highly variable, while the contribution made by public and 
non-profit -making sectors towards the R&D of medicines is not a lways accounted for. The marginal 
production costs of medicines are relatively small compared to their market prices while a significant 
proportion of this expenditure might be for marketing and promotional activities, which are cost s 
not related to the de velopment of the product.  
11.  Companies in the health technology sector, including pharmaceutical and bio -similar market, 
achieve market dominance through various means, including the protection of intellectual property 
that keeps generic or biosimilar competi tion out of the market for varying periods of time depending 
on the jurisdiction. Patents on new molecules, new combinations, variations of existing molecules, 
and patents on minor variations of an existing product tend to consolidate existing market posit ions 
and may lead to de facto  monopolies or differentiated oligopolies.  
12.  In any given system, pricing strategies of pharmaceutical companies and healthcare providers 
that hold monopolist positions are always welfare reducing. In order to maximize its profi t a 
monopolist would supply at a quantity lower and at  a higher price than what would maximize societal 
welfare. This would cause a transfer of welfare from consumers to the monopolist, as well as a loss 
of overall economic efficiency for the society. The WTO, WIPO and WHO Report on IP and Public 
Health (Trilateral Study)  notes the following: "One of the main arguments put forward by industry 
with respect to the need for strict protection of IPRs is the high cost of R&D for new medical 
                                                
3 Jonathan D. Campbell & Zolt án Kaló (2018) Fair global drug pricing, Expert Review of 
Pharmacoeconomics & Outcomes Research, 18:6, 581 -583, DOI: 10.1080 /14737167.2018.1524296 
https://doi.org/10.1080/14737167.2018.1524296 . IP/C/W/659  
 
- 3 - 
 
  products… [T]here are , however, few sources of data available that enable the true costs of medical 
research to be assessed. "4 
13.  The sponsor of this communication calls on Members to share their experiences of how TRIPS 
flexibilities have been used to address high prices and bar riers to access to medical technologies and 
medicines in order to achieve public health and related national objectives. In the past the impact 
of competition and anti -trust laws on access to medicine s was explored in IP/C/W/643. The issue of 
abuse of IP r ights remains relevant in the context of the application of national and regional norms 
to ensure cheaper and more effective access to medical technologies and medicine. Policies that 
influence the pricing of health technologies or the appropriate rewards for successful research 
outcomes can be better evaluated when there is reliable, transparent and sufficiently detailed data 
on the costs of R&D inputs (including information on the role of public funding and subsidies), the 
medical benefits and added thera peutic value of products.  
Guiding questions:  
 
• What are the TRIPS flexibilities adopted by Members in the ir Patent laws to ensure availability 
of patented medicines at reasonable prices?  
• What are Members experiences with escalating prices of patented medicine s and what are 
the policy responses implemented to address this trend through the use of TRIPS flexibili ties? 
• What approaches have Member s implemented regarding price regulation of patented 
medicines such as a combination of cost -based pricing, value -based pricing, reference 
pricing, and/or through tendering and negotiation, and regulating mark -up levels? If  any of 
these approaches have been used, what are the results and challenges that Members face 
to ensure compliance and disclosure of necessary information or their effect on the prices of 
medicines?  
• What measures have Members implemented to enhance the publicly available information 
on the costs of manufacturing of medicines, vaccines and health technologies, in particular 
information on grants, tax credits or any other public sector subsidies and inc entives relating 
to the initial regulatory approval and annually on the subsequent development of a product 
or procedure?  
• Can Members share their experiences to improve the transparency of the patent landscape 
of medical technologies to ensure that no barr iers are created to generic competition through 
sharing complete and up to date information?  
__________  
                                                
4 WHO/WIPO/WTO Promoting Access to Medical Technologies and Innovation. Intersections between 
Public Health, Intellectual Pr operty and Trade . Geneva 2012, p. 107  
http://www.who.int/phi/promoting_access_medical_innovation/en/ .