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The role of competition in increasing access to and

decreasing prices of ARV medicines

Boyan Konstantinov, Regional Legal SpecialistHIV, Health and Development Team, UNDP IRH

Based on “Using Competition Laws to Promote Access to Health Technologies”

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• Frederick Abbott• Sean Flynn• Carlos Correa• Jonathan Berger• Natasha Nyak

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Examples how to increase access to medicines in the context of IP

Flexibilities

Incorporating the TRIPS public health flexibilities and using them

No TRIPS-plus

Not allowing TRIPS-plus provisions; if they are adopted, adopting and applying measures to mitigate their harmful impact on public health

Competition

Using competition law to promote access to essential medicines

Very efficient but very rarely used

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Why does competition matter?• Intellectual property is often used to restrict competition• A monopolist can dictate the prices• If there are alternatives, people will choose the cheaper options• But what if there are no alternatives?• But if the price is too high won’t the supplier lose money?• Yes, if there is competition. If there is no competition, sometimes

selling less for more money brings more profit…• … but, in the world of medicines, this means that people are left out

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One example:

Assume productions costs are 0

Number sales Price per unit Revenue99 $1 $9998 $2 $19697 $3 $29196 $4 $38495 $5 $47594 $6 $56493 $7 $65150 $50 $2,50049 $51 $2,49948 $52 $2,49647 $53 $2,49146 $54 $2,48445 $55 $2,47544 $56 $2,46443 $57 $2,451

Source: Flynn, Hollis, Palmedo: An Economic Justification for Open Access to Essential Medicine Patents in Developing Countries, 2008

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Examples of anti-competitive practices

• Price-fixing• Bid-rigging• Market allocation

• Buyouts• Pay for delay• Patent pools (no, not the MPP)

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Examples of anti-competitive practices

• Refusal to license• Abusive and excessive pricing• Restricting access to “essential

facilities”

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Why are competition law and policy suitable for reducing cost of treatment?

• Substantial flexibility, including under WTO and TRIPS

• Greater remedies

• More actors involved

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Remedies for anti-competitive behavior

• Settlements• Injunctions• Compulsory license• Damages• Control of M&A• Fines• Prison

UNAIDS 2013 Report• Effective and Sustainable HIV

responses• South Africa’s example: the

biggest number of PLHIV• Thanks to competition

mechanisms SA has decreased cost of treatment tremendously – US$ 113 PPY for FDC recommended by the 2013 WHO Guidelines

• Result: 53% decrease of expenses for ARV therapy in SA = substantial increase of people on treatment Source:

UNAIDS

Decrease of cost of efavirenz

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12

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дол

ларо

в СШ

А/уп

аков

ка

2008 г. – six volun-tary licenses to generic producers

2010 г. Govern-ment tender with ten suppliers – orig-inators and gener-ics

2007 one originator supplier

Sources: TAS, Global Fund, SA MoH, UNDP

Development of IP laws and policy in South Africa

2002 - The Hazel Tau Case: The Competition Commission of SA rules that two originator produces have increased ARV prices excessively and have also denied access to essential facilities to their competitors. Recommendation to the Competition Tribunal for a compulsory license and fine.

Quick decision of the originators to give voluntary license without waiting for the Tribunal Decision – against 5% of the price of the generic equivalent.

2007 - Complaint against denial of a voluntary license on efavirenz

Immediate decision of the originator to give several licenses – for government use and to the private sector. Permission to export in 10 other African countries. Originator declined remuneration.

Development of IP protection and enforcement 2008-2014

2010- EFTA FTA: additional increase of data exclusivity

2008 – WTO accession. TRIPS-plus: data exclusivity, patent-registration linkage, patent enforcement at administrative and criminal levels.

2012 – Ratification of the Medicrime Convention – criminal sanctions (not in force yet)

2014 - AA with the EU- measures in enforcement of IP

Prices of abacavir in South Africa and Ukraine

Source: Global Fund PQR

Prices of LPV/RTV in South Africa and Ukraine

Law on the Protection of Economic Competition (Ukraine)

Article 6. Anticompetitive Concerted Actions of Economic Entities1. Concerted actions, which resulted or can result in the prevention, elimination or

restriction of competition shall be anticompetitive concerted actions.

2. Concerted actions shall be considered as anticompetitive….1) the setting of prices or other conditions with respect to the purchase or sale of products;2) the restriction of production, product markets, technical and technological development, investments or the establishment of control over them;3) the distribution of markets or sources of supply in accordance with the territorial principle, the assortment of products, the volume of their sale or purchase, in accordance with the circle of sellers, buyers or consumers or in accordance with other signs;4) the distortion of the results of auctions, contests, tenders;

Law on Protection of Economic Competition (Ukraine)

5) the removal of other economic entities, buyers, sellers from the market or the limitation of their entry into (exit from) the market;6) the application of different conditions to equivalent agreements concluded with other economic entities, which results in the creation of a disadvantage for these economic entities in terms of competition;7) the conclusion of agreements provided that other economic entities assume additional obligations whose content or which in terms of customs in trade and other fair customs in entrepreneurial activities have nothing in common with the subject of these agreements;8) the substantial limitation of the competitiveness of economic entities on the market without objectively justified causes.3. Anticompetitive concerted actions shall be prohibited and shall entail responsibility according to laws.4. A person who had committed anticompetitive concerted actions…

Law on Protection of Economic Competition (Ukraine)

Article 9.Concerted Actions Relating to Intellectual Property Rights1. The provisions of Article 6 … shall not be applied to agreements on the transfer of IP rights or on granting the right to use the IP to the extent of the limitation… of economic activities of the … party to whom the right is transferred unless these limitations exceed the limits of the legitimate rights of the IP entity.2. It shall be considered that limitations relating to the volume of transferred rights, the period and territory of validity of the permission to use the IP object, those relating to the type of activities, the sphere of use, the minimal volume of production do not exceed the limits of the rights mentioned in Part 1 of the present Article.

Conclusions

• Competition law and policy can be a powerful tool to increase access to essential medicines in Ukraine.

• There is a need to revisit and reassess the role the competition laws and authorities .

• The TRIPS Agreement contains numerous provisions that can and should be incorporated in competition law to limit unfair competition and provide remedies for anti-competitive behavior.

• Civil society could become a catalyst of this process, in a dialogue with government and support from the international community.

• European laws policies and practices and the FTA encourage this process.