Council Regulation (EC) No 953/2003 of 26 May 2003 to avoid trade diversion into the European Union of certain key medicines
Date: 2003-05-26
Institutions: Council of the European Union
Subjects: customs inspection, discriminatory price, export (EU), export restriction, import (EU), import restriction, medicinal product

3.6.2003

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Official Journal of the European Union

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COUNCIL REGULATION (EC) No 953/2003

of 26 May 2003

to avoid trade diversion into the European Union of certain key medicines

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community, and in particular Article 133 thereof,

Having regard to the proposal from the Commission,

Whereas:

(1)

(2)

(3)

(4)

(5)

On 21 February 2001,
the Commission adopted a
communication to the European Parliament and to the
Council on accelerated action targeted at major commu-
nicable diseases within the context of poverty reduction,
according to which the Commission was instructed, inter
alia, to establish a global tiered pricing system for key
pharmaceuticals for the prevention, diagnosis and treat-
ment of HIV/AIDS, TB and malaria and related diseases
for the poorest developing countries and to prevent
product diversion of these products to other markets by
ensuring that effective safeguards were in place.

In a resolution dated 14 May 2001 on accelerated action
on HIV, TB and malaria, the Council underlined the need
to reinforce safeguards against diversion of low priced
pharmaceuticals destined for poor markets and prevent
price erosion in developed countries markets.

On 15 March 2001, a resolution of the European Parlia-
ment on access to drugs for HIV/AIDS victims in devel-
oping countries noted the inclusion of a commitment to
tiered pricing in the Commission's programme for action
and called for a system allowing developing countries
equitable access to medicines and vaccines at affordable
prices.

Many of the poorest developing countries are in urgent
need of access to affordable essential medicines for treat-
ment of communicable diseases. These countries are
heavily dependant on imports of medicines as local
manufacturing is scarce.

Price segmentation between developed country markets
and the poorest developing country markets is necessary
to ensure that
the poorest developing countries are
supplied with essential pharmaceutical products at
heavily reduced prices. Therefore, these heavily reduced
prices cannot be understood as a reference for the price
to be paid for the same products in developed country
markets.

(6)

(7)

(8)

(9)

importation,

Legislative and regulatory instruments are in place in
most developed countries to prevent
in
certain circumstances, of pharmaceutical products, but
risk becoming insufficient where
these instruments
substantial volumes of heavily discounted pharmaceuti-
cals are sold to the poorest developing country markets
and the economic interest in trade diversion into high
priced markets therefore may increase significantly.

There is a need to encourage the pharmaceutical produ-
cers
to make pharmaceutical products available at
heavily reduced prices in significantly increased volumes
by ensuring through this Regulation that these products
remain on those markets. Donations of pharmaceutical
products and products sold under contracts awarded in
response to competitive tenders from national govern-
ments or international procurement bodies, or under a
partnership agreed between the manufacturer and the
government of a country of destination may qualify
under this Regulation on equal conditions, bearing in
mind that donations are not contributing to the
improvement of access to these products on a sustain-
able basis.

For the purpose of this Regulation,
it is necessary to
establish a procedure which identifies the products,
countries and diseases covered by this Regulation.

This Regulation serves the purpose of preventing tiered
priced products from being imported into the Commu-
nity. Exemptions are laid down for certain situations
under the strict provision that it is ensured that the final
destination of the products in question is one of the
countries listed in Annex II.

(10) Manufacturers of

tiered priced products must differ-
entiate the appearance of tiered priced products to facili-
tate the task of identifying them.

(11)

(12)

It will be appropriate to review the lists of the diseases
and the countries of destination covered by this Regula-
tion, as well as the formulae used to identify tiered
priced products in the light, inter alia, of the experience
gained from its application.

The measures necessary for the implementation of this
Regulation should be adopted in accordance with
Council Decision 1999/468/EC of 28 June 1999 laying
down the procedures for the exercise of implementing
powers conferred on the Commission (1).

(1) OJ L 184, 17.7.1999, p. 23.

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(13) With regard to tiered priced products contained in
travellers' personal luggage for personal use, the same
rules as set out in Council Regulation (EC) No 3295/94
of 22 December 1994 laying down measures to prohibit
the release for free circulation, export, re-export or entry
for a suspensive procedure of counterfeit and pirated
goods (1), currently being reviewed, should apply.

(14) Where tiered priced products have been seized under
this Regulation, the competent authority may, in accor-
dance with national
legislation and with a view to
ensuring that the intended use is made of the seized
products to the full benefit of the countries listed in
Annex II, decide to make them available for humani-
In the absence of
tarian purposes in these countries.
such decision, the seized products should be destroyed,

HAS ADOPTED THIS REGULATION:

Article 1

1.

This Regulation lays down:

The following shall be exempted from the prohibition

2.
regarding tiered priced products as set out in paragraph 1:

(a) re-export to countries of destination;

(b) placing under a transit or customs warehouse procedure or
in a free zone or free warehouse for the purpose of re-
export to a country of destination.

Article 3

The tiered price referred to in Article 4(2)(ii) of this Regulation
shall, at the option of the applicant, be either:

(a) no higher than the percentage set out in Annex III of the
weighted average ex factory price charged by a manufac-
turer in OECD markets for the same product at the time of
application; or, alternatively,

(b) a manufacturer's direct production costs, with the addition
of a maximum percentage which is set out in Annex III.

Article 4

(a) the criteria for establishing what is a tiered priced product;

(b) the conditions under which the customs authorities shall

take action;

1.
In order for products to benefit from this Regulation,
manufacturers or exporters of pharmaceutical products shall
submit applications to the Commission.

(c) the measures which shall be taken by the competent autho-

rities in the Member States.

Any application addressed to the Commission shall

2.
contain the following information:

2.

For the purposes of this Regulation:

(a) ‘tiered priced product’ means any pharmaceutical product
used in the prevention, diagnosis and treatment of a disease
referred to in Annex IV which is priced in accordance with
one of the optional price calculations set out in Article 3,
verified by the Commission or an independent auditor as
provided for in Article 4 and entered in the list of tiered
priced products set out in Annex I;

(b) ‘countries of destination’ are those countries listed in Annex

II;

(c) ‘competent authority’ means an authority designated by a
Member State to determine whether goods suspended by
the customs authorities in the respective Member State are
tiered priced products and to give instructions depending
on the outcome of the review.

Article 2

It shall be prohibited to import into the Community
1.
tiered priced products for the purposes of release for free circu-
lation,
suspensive procedures or
re-export, placing under
placing in a free zone or free warehouse.

(i) the product name and active ingredient of the tiered priced
product and sufficient information to verify which disease
it is preventing, diagnosing or treating;

(ii) the price offered in relation to either of the optional price
calculations set out
in Article 3 in sufficient detail
to
Instead of submitting such detailed
enable verification.
information, the applicant may submit a certificate issued
by an independent auditor, stating that the price has been
verified and corresponds to one of the criteria set out in
Annex III. The independent auditor is appointed in agree-
ment between the manufacturer and the Commission. Any
information submitted by the applicant to the auditor shall
remain confidential;

(iii) the country or countries of destination to which the appli-

cant intends to sell the product concerned;

(iv) the code number based on the Combined Nomenclature as
set out in Annex I to Council Regulation (EEC) No 2658/
87 of 23 July 1987 on the tariff and statistical nomencla-
ture and on the Common Customs Tariff (2) and, where
appropriate, supplemented by TARIC subdivisions, to iden-
tify unambiguously the goods concerned;

(v) any measures taken by the manufacturer or exporter to
make the tiered priced product easily distinguishable from
identical products offered for sale inside the Community.

(1) OJ L 341, 30.12.1994, p. 8; Regulation as last amended by Regula-

tion (EC) No 241/1999 (OJ L 27, 2.2.1999, p. 1).

(2) OJ L 256, 7.9.1987, p. 1; Regulation as last amended by Commis-
sion Regulation (EC) No 2176/2002 (OJ L 331, 7.12.2002, p. 3).

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The Commission shall determine whether a product fulfils
3.
the criteria set out in this Regulation in accordance with the
procedure laid down in Article 5(2).

4. Where the requirements set out in this Regulation are
fulfilled, the product shall be added to Annex I at the next
following update. The applicant shall be informed of the deci-
sion of the Commission within 15 days.

5.
If an application is not sufficiently detailed for review as
to substance, the Commission shall in writing ask the applicant
to submit such missing information. If the applicant does not
complete the application within the time period set out in that
communication, the application shall be null and void.

6.
If the Commission finds that the application does not
fulfil the criteria set out in this Regulation, the application shall
be rejected and the applicant shall be informed within 15 days
of the date of the decision. Nothing shall prevent the applicant
from resubmitting a modified application for the same product.

Products destined to be donated to recipients in one of
7.
the countries listed in Annex II may be notified accordingly for
approval and insertion in Annex I.

Annex I to this Regulation shall be updated every second

8.
month by the Commission.

9. Where adjustments to Annexes II, III and IV are necessary,
the procedure referred to in Article 5(3) shall apply.

Article 5

1.

The Commission shall be assisted by a committee.

2. Where reference is made to this paragraph, Articles 3 and
7 of Decision 1999/468/EC shall apply.

3. Where reference is made to this paragraph, Articles 5 and
7 of Decision 1999/468/EC shall apply.

The period laid down in Article 5(6) of Decision 1999/468/EC
shall be set at two months.

4.

The Committee shall adopt its Rules of Procedure.

Article 7

A permanent logo, as set out in Annex V, shall be affixed on
any packaging or product and any document used in connec-
tion with the approved product sold at tiered prices to coun-
tries of destination. This applies as long as the tiered priced
product concerned remains listed in Annex I.

Article 8

1. Where there is reason to suspect that, contrary to the
prohibition in Article 2, tiered priced products will be imported
into the Community, customs authorities shall suspend the
release of, or detain, the products concerned for the time neces-
sary to obtain a decision of the competent authorities on the
character of the merchandise. The period of suspension or
detention shall not exceed 10 working days unless special
circumstances apply, in which case the period may be extended
by a maximum of 10 working days. Upon expiry of this period,
the products shall be released, provided that all customs form-
alities have been complied with.

It shall be sufficient reason for the customs authorities to
2.
suspend the release of, or detain, products if there is sufficient
information available to consider that the product in question
is tiered priced.

3.
The competent authority in the Member State concerned
and the manufacturer or exporter mentioned in Annex I shall
be informed without delay of the suspended release or deten-
tion of the products and shall receive all information available
with respect to the products concerned. Due account shall be
taken of national provisions on the protection of personal data,
commercial and industrial secrecy and professional and admin-
istrative confidentiality. The importer, and where appropriate,
the exporter, shall be given ample opportunity to supply the
competent authority with the information which it deems
appropriate regarding the products.

The procedure of suspension or detention of the goods is
4.
carried out at the expense of the importer. If it is not possible
to recover these expenses from the importer, they may,
in
accordance with national
legislation, be recovered from any
other person responsible for the attempted illicit importation.

Article 6

Article 9

A product approved as a tiered priced product and inserted in
Annex I shall remain on that list for as long as the conditions
set out in Article 4 are fulfilled and annual sales reports have
been submitted to the Commission in accordance with Article
11. The applicant must submit information to the Commission
on any change which has occurred with respect to the scope or
conditions set out in Article 4 in order to ensure that these
requirements are met.

1.
If products suspended for release or detained by customs
authorities are recognised by the competent authority as tiered
priced products under this Regulation, the competent authority
shall ensure that these products are seized and disposed of in
accordance with national
legislation. These procedures are
carried out at the expense of the importer. If it is not possible
to recover these expenses from the importer, they may,
in
legislation, be recovered from any
accordance with national
other person responsible for the attempted illicit importation.

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subsequent

2. Where products suspended for release or detained by
customs authorities
to further control by the
competent authority are found not to qualify as tiered priced
products under this Regulation, the customs authority shall
release the products to the consignee, provided that all customs
formalities have been complied with.

The competent authority shall inform the Commission of

3.
all decisions adopted pursuant to this Regulation.

Article 10

This Regulation shall not apply to goods of a non-commercial
nature contained in travellers' personal luggage for personal use
within the limits laid down in respect of relief from customs
duty.

Article 11

1.
The Commission shall monitor on an annual basis the
volumes of exports of tiered priced products listed in Annex I
and exported to the countries defined in Article 1 on the basis
of information provided to it by pharmaceutical manufacturers
and exporters. For this purpose a standard form will be issued
by the Commission. Manufacturers and exporters must submit
such sales reports annually for each tiered priced product to
the Commission on a confidential basis.

The Commission shall periodically report to the Council
2.
on the volumes exported under tiered prices, including on the
volumes exported within the framework of a partnership agree-
ment agreed between the manufacturer and the government of
a country of destination. The report shall examine the scope of
countries and diseases and general criteria for the implementa-
tion of Article 3.

Article 12

The application of this Regulation shall

in no circum-
1.
stances interfere with procedures laid down in Directive 2001/
83/EC of the European Parliament and of the Council of 6
November 2001 on the Community code relating to medicinal
products for human use (1) and Council Regulation (EEC) No
2309/93 of 22 July 1993 laying down Community procedures
for the authorisation and supervision of medicinal products for
human and veterinary use and establishing a European Agency
for the Evaluation of Medicinal Products (2).

This Regulation shall not interfere with intellectual prop-

2.
erty rights or rights of intellectual property owners.

Article 13

This Regulation shall enter into force on the day following its
publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 26 May 2003.

For the Council

The President

G. DRYS

(1) OJ L 311, 28.11.2001, p. 67; Directive as amended by Directive

2002/98/EC (OJ L 33, 8.2.2003, p. 30).

(2) OJ L 214, 24.8.1993, p. 1; Regulation as amended by Commission

Regulation (EC) No 649/98 (OJ L 88, 24.3.1998, p. 7).

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ANNEX I

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ANNEX II

COUNTRIES OF DESTINATION

Afghanistan

Angola

Armenia

Azerbaijan

Bangladesh

Benin

Bhutan

Botswana

Burkina Faso

Burundi

Cambodia

Cameroon

Cape Verde

Central African Republic

Chad

China

Comoros

Congo, Democratic Republic of

Congo, Republic of

Côte d'Ivoire

Djibouti

East Timor

Equatorial Guinea

Eritrea

Ethiopia

Gambia

Ghana

Guinea

Guinea-Bissau

Haiti

Honduras

India

Indonesia

Kenya

Kiribati

Korea, Democratic Republic of

Kyrgyz Republic

Lao People's Democratic Republic

Lesotho

Liberia

Madagascar

Malawi

Maldives

Mali

Mauritania

Moldova

Mongolia

Mozambique

Myanmar

Namibia

Nepal

Nicaragua

Niger

Nigeria

Pakistan

Rwanda

Samoa

São Tomé and Príncipe

Senegal

Sierra Leone

Solomon Islands

Somalia

South Africa, Republic of

Sudan

Swaziland

Tajikistan

Tanzania, United Republic of

Togo

Turkmenistan

Tuvalu

Uganda

Vanuatu

Vietnam

Yemen

Zambia

Zimbabwe

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ANNEX III

PERCENTAGES REFERRED TO IN ARTICLE 3

Percentage referred to in Article 3(a): 25 %

Percentage referred to in Article 3(b): 15 %

ANNEX IV

SCOPE OF DISEASES

HIV/AIDS, malaria, tuberculosis and related opportunistic diseases

ANNEX V

LOGO

The winged staff of Aesculapius with a coiled serpent, in the centre of a circle formed by 12 stars.