Explanatory Memorandum to COM(2002)592 - Proposal for a Council Regulation to avoid trade diversion into the EU of certain key medicines

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dossier COM(2002)592 - Proposal for a Council Regulation to avoid trade diversion into the EU of certain key medicines.
source COM(2002)592 EN
date 30-10-2002
The Commission presented a policy framework on Accelerated Action targeted at major communicable diseases within the context of poverty reduction in September 2000  i on the need for accelerated action targeted at major communicable diseases within the context of poverty reduction. It explains the issue of communicable diseases as a burden on the poorest and an obstacle to development, analyses the major policy issues involved, reports on the rationale for continuous Community involvement and sets out a framework with three broad areas for targeted action;  i Reaching optimal impact of existing interventions, services and commodities targeted at the major communicable diseases affecting the poorest populations.  i Increasing affordability of key pharmaceuticals through a comprehensive and synergistic global approach.  i Increasing investment in research and development of global goods targeted at the three major communicable diseases.

Many of the poorest developing countries face severe health crises and are in urgent need of improved access to affordable essential medicines for treatment of communicable diseases. These countries are, normally, heavily dependant on imports of medicines as local manufacturing is exceptional. The reasons why this is so include, but are not limited to, the effects of international and national pricing policies, tariffs and taxation and implementation of intellectual property rights agreements. Options to improve access and affordability include, inter alia, sustainable application of tiered pricing set in a comprehensive global approach.

In February 2001 the Commission adopted a Programme for Action: Accelerated action on HIV/AIDS, malaria and TB in the context of poverty reduction  i which establishes a broad and coherent Community response over the period 2001-2006, to address the global emergency caused by the three major communicable diseases.

The Programme for Action proposes that manufacturers and exporters offer the lowest possible prices to the poorest developing countries, as defined in the Programme  i without profits being threatened in developed countries.  i This should build on a volume/price trade off where the poorest countries benefit from low tiered prices. Price segmentation between developed country markets and the poorest developing country markets is necessary.

Legislative and regulatory instruments are in place in most developed countries to prevent importation, in certain circumstances, of pharmaceutical products, but these instruments risk becoming insufficient as substantial volumes of strongly discounted pharmaceuticals are sold to the poorest developing country markets and the economic interest in trade diversion into high priced markets therefore may increase significantly. Effective measures need to be in place to prevent this trade. Such measures should also 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.

To achieve the objectives set by the Programme for Action the proposed Regulation is prohibiting the entering into the Customs territory of the Community  i of products that have been approved as tiered priced and subsequently exported to a poor developing country as defined. For a product to qualify as tiered priced in the meaning of the proposed regulation, it must be included in Annex 1 of the present Council Regulation. Applications may be submitted, on a voluntary basis, for inclusion in Annex 1 in accordance with the rules and procedures set out in the Regulation. At this stage the proposed Regulation is addressing the three major communicable diseases and the poorest developing countries i.e. it fully adopts the scope set out in the Programme for Action. The proposed Regulation is, however, providing for review in the future, with regard to the scope of diseases and recipient countries in light of existing and future health crises in the developing world as well as of the general criteria for the implementation of Article 3 depending on the experience gained in terms of increased volumes supplied to the poorest countries (contained in Annexes 2 to 4).