Russia Competition Week: Round table on Pharmaceutical Issues

The participants of the session have focused on 3 major topics or what the chair – Director of the HSE-Skolkovo Institute Alexey Ivanov called them the “erogenous zones of Antitrust authorities in Pharmaceutical markets”:

• The fact that a large part of profits enjoyed by large pharmaceuticals comes from Intellectual property
• Generic drugs
• The co-existence of Intellectual property rights ant antitrust regulation
One country cannot always successfully control a TNC, therefore, the participants have acknowledged the importance of international collaboration in order to deal with those questions. The chair has summarised the view of the participants in one sentence – “Solidarity between countries”.
After the introductory statements, representatives from BRICS antitrust authorities went on to present the situation in their countries: updates on legal practices, examples of successful cases and propositions for future work.

South Africa
South African delegation shared their strategy in the recent case regarding the AIDS/HIV drugs provided by GSK. This proved to be an issue of high importance, as 40% of public health spending on pharmaceutical products in South Africa stem from this area. Furthermore, it identified that in 1980 – 2000 pharmaceutical costs were the highest proportion of spenditure in healthcare sector. The investigation led by the competition commission has identified that TNCs were overpricing the respective drugs by 40% through anticompetitive practices such as, refusing to license local manufacturers.
However, this case is significant as the government and business managed to start an efficient dialogue, which led to a win/win situation. Pharmaceutical TNC have agreed to license local manufacturers and decrease the fee from 40% to 5%. This has brought prices down to a level below global average, which in turn has increased the demand and led to South Africa purchasing more of the AIDS/HIV drugs. Furthermore, this case has helped to soften licensing conditions, in the rest of the continent, which turned out to be life-saving. South African delegation has thus shared an important example of possible benefits of state/business collaboration.

Chinese delegation has pleasantly surprised everyone by delivering their speech in Russian. They focused on the importance of protection of the consumer rights in pharmaceutical market as it is an area of high social importance.

Indian delegation focused on the problem of restriction of generic drugs in pharmaceutical markets.

After hearing the speeches from the BRICS representatives, the round table went on to discuss following questions:

1. How do antitrust authorities in Europe view compulsory licensing? The representative of the Austrian antitrust authority showed European wariness of such measures by stating that “we [Austrian Antitrust Authority] are not truly brave to fully embrace compulsory license. We [Austrian Antitrust Authority] are restrictive”. At the same time, he stressed that this issue is currently being discussed in Austria, but with consideration of position of interested parties (pharmaceutical companies). Thus, we can see that the approach of the Austrians is very cautious; for the time being they are watching what others are doing and are not ready to initiate the conflict with pharmaceutical companies.

2. What can be done together? In what areas can the antitrust authorities of the BRICS + countries can collaborate? Head of Russian FAS, Mr. Artemyev stressed the importance of creating a platform that would facilitate such collaboration, especially utilizing the opportunities provided by digital space. More specifically, he proposed the creation of a single Internet platform between the antitrust authorities of the BRICS + countries, which would contain the average retail prices of pharmaceutical products in respective countries. This would allow to quickly highlight artificially inflated prices with minimal costs and thus prevent an anticompetitive practice employed by some farm companies, such as: over-pricing, especially in developing markets of BRICS countries. Artemyev called for fair and equal pricing by stating “behave in the Russian Federation as well as in other countries”.

3. Alexey Ivanov emphasized the problem of big pharmaceutical companies, buying start-ups, merging with other companies, in every possible way to protect the industry from newcomers and possible competitors by restricting entrance to the market. He highlighted the fact that the pharmaceutical industry is one of the most concentrated industries in the world. Large, well-established companies spend billions on the purchase of start-ups, on marketing, rather than on research. Research funding often comes out of the “state’s wallet”. This, basically undermines and to some extent perverts the original purpose of the patents – compensation of large financial costs of research and encouragement of further innovation. Thus, both the head of Russian FAS Mr. Artemyev and Alexey Ivanov both stress the importance of ex ante control - control that would limit concentration.

4. Further discussion incorporated representatives of both state and business. Representatives of pharmaceutical companies emphasized that they are ready for a dialogue, but they want to play according to transparent and understandable rules of the game. Moreover, they stressed that they currently operate within the framework of patents and within the framework of the laws of intellectual property. In response to that Alexey Ivanov stated that although the government sets the rules, it is not an omniscient agent and those laws can prove to be inefficient in practice and/or outdated. For example, such a mistake was the introduction of parallel imports into the Russian Federation upon accession to the WTO. According to Alexey, the formula of success is simple - the patent system and antitrust legislations must balance each other and thus constant review and dialogue is necessary. The head of Russian FAS Mr. Artemyev concluded the session by stating that for the BRICS countries, a balance of interests with pharmacy is crucial. He emphasized that the government remembers the positive input by pharmaceutical companies which has saved many lives on the planet, but stressed that if we care about saving future lives, we need symmetry and balancing of the whole process in order to create fair and transparent market.