Today the Council adopted a regulation enabling exporters to deliver essential medicines at strongly reduced (‘tiered’) prices to poor countries by making sure the goods are not diverted back to the European Union. EU Trade Commissioner Pascal Lamy welcomed the decision: 'This regulation is an important contribution to a global partnership ensuring cheap yet sustainable supply of key medicines to the populations of poor countries. Industry sells the medicines at prices only slightly above their own production costs, whereas public and private donors provide the necessary funding for research & development. The EU provides the necessary legal framework, in order to ensure that the medicines are not diverted back into EU markets. We are thus setting an example with a practical means of helping poorer countries struggling with public health crises.' EU Commissioner for Development and Humanitarian Aid, Poul Nielson, stated 'I welcome this regulation as a measure which delivers in a tangible, concrete way what we promised in the Programme of Action. We need to substantially increase the supply of tiered-price products so that cheaper medicines reach the poorest patients. This measure should be seen as part of a wider plan to improve the health situation in developing countries.'
The regulation adopted today aims to enable producers to significantly increase supplies of medicines to combat HIV/AIDS, malaria and tuberculosis at lower, so-called ‘tiered’ prices, while keeping higher prices for the same items in the EU. Exporters are invited to put their products on a tiered-price list run by the European Commission. Both patented and generic products can be registered. In order to be added to the list, medicines have to be made available either with a price cut of 75% off the average 'ex factory ' price in OECD countries, or at the cost of production plus 15%. The proposed system is simple and transparent.
The products on the list shall bear a logo allowing customs to easily identify them. Being on this list and bearing the logo will mean that imports of these products into the EU for free circulation, re-exportation, warehousing or trans-shipment will be prohibited.
Re-importation into the EU is prohibited from 76 countries, including least developed countries, and low-income countries , and those where HIV/AIDS is particularly prevalent. Most of these countries cannot produce locally the medicines they need. Pharmaceutical producers in developed countries need security that discounted products supplied in large volumes do actually reach and stay in poor countries they are meant for and are not diverted into high price markets . It is hoped that other developed countries will put in place similar measures.
The step taken by the EU today is another contribution to the fight against deathly diseases. The EU hopes other developed countries will follow suit. This issue will be high on the agenda of the up-coming summit of the G-8 countries in Evian on 1-2 June.
In February 2001 the European Commission adopted a Programme for Action: Accelerated action on HIV/AIDS, malaria and TB in the context of poverty reduction, establishing a broad and coherent Community response for 2001-2006, to address the global emergency caused by these three major communicable diseases. Today's measure is another building block in this long-term strategy.
The Programme proposes that manufacturers and exporters in the EU offer the lowest possible prices to the poorest developing countries without profits being threatened in the EU. This should build on a volume/price trade- off, enabling the poorest countries to benefit from low prices. Price segmentation between developed country markets and the poorest developing country markets is therefore necessary.
Legislative and regulatory instruments are in place in most developed countries to prevent importation, in certain circumstances, of pharmaceutical products, but these instruments may not be adequate if substantial volumes of strongly discounted pharmaceuticals are sold to the poorest developing country markets. The risk of diversion into high priced markets may increase. Preventive measures adopted by public authorities should encourage the industry to commit itself to offer essential medicines at tiered prices on a sustainable basis. In future, tiered pricing for the poorest developing countries should no longer be the exception, but the rule.
There are separate discussions underway at the World Trade Organisation involving Trade-Related Intellectual Property rights about the terms under which countries in need of medicines may invoke compulsory licences to manufacture them. If poorer countries get their medicines via a tiered-pricing system, they should not need to invoke compulsory licences. If the tiered-pricing system works, it could be extended to more countries and treatments.
Cheap or even free medicines alone are not enough to solve health crises in poor countries. Measures to make drugs available must work in conjunction with other points taken up in the Commission action plan the need for stable, functioning health care systems and better public health awareness via education. The action plan also calls for more research into new treatments for diseases prevalent in poorer countries.