A strong link exists between patent protection and anti-competitive behaviour in the pharmaceutical market since patents grant their holders monopoly privileges. There is a growing body of evidence that competition and, in particular, generic competition has a substantial impact on the prices of medicines.106 Monopoly prices resulting from patent protection as well as anti-competitive practices therefore need to be regulated for public health purposes. Intervention through regulatory and strong judicial institutions is necessary to curb anti-competitive behaviour due to the large concentration in the pharmaceutical industry where nearly 40 per cent of the estimated worldwide market for pharmaceuticals is held by 10 companies.107 This has largely been a result of a spate of mergers over the last several years. The mergers have been spurred by two conflicting policies. One is based on the idea that a certain size is required for investment in platform technologies, which can generally be shared across different programme research areas. The other, is based on the idea that it is not possible for one organization to own all the technology and that what is needed are companies that can pick and choose their business relationships by creating a critical mass of talent.
106 Abbott (2002), p. 16. Also see Abbott (2001) Annex A.
107 See IMS Health World Review (2002), IMS Market Report. Available at www.ims-global.com/insight/report/global/report.htm cited in Kaplan et al. (2003) p.10.
The pricing behaviour of these companies in such a concentrated market is one of the reasons that has fuelled the debate on intellectual property in relation to product patents for pharmaceuticals. More importantly, because of the concentration in the industry, taking action to deal with anti-competitive and other abusive behaviour by companies means that the government is going against very powerful entities. Such an undertaking requires high levels of investigative and negotiating sophistication, economic and political clout and strong judicial institutions. This is very difficult to achieve in small developing countries, which have neither the expertise in competition regulation nor the economic and political clout. Regionally, however, various possibilities exist that would enable such countries to address these challenges.
The existing RECs provide a basis for developing countries to carry out joint investigations into the business practices of pharmaceutical companies generally and their use of their market power. By establishing regional mechanisms for this purpose, countries would have better information through sharing and would also share their expertise. Where training or technical assistance is needed the cost would also be lower. A regional approach would also provide a framework through which countries such as South Africa, which has already undertaken competition enforcement action against pharmaceutical companies, could share their experiences.
The various RECs in Africa, Latin America and the Caribbean and Asia have institutional frameworks through which such a mechanism can be operationalized. At the same time, all the major RECs in Africa and Latin America and the Caribbean have regional courts and or regional dispute settlement mechanisms. In Africa, all the four main regional economic communities together with the AEC establish courts of justice or tribunals fairly along the lines of the European Court of Justice. Enforcement action can therefore be undertaken through administrative procedures, and where necessary, through court procedures. Such a mechanism could also be tailored to improve general information sharing in the region in relation to pharmaceutical markets, price and patent status of various pharmaceutical products.
Competition enforcement is critical in ensuring a competitive pharmaceutical industry both in terms of lowering prices and ensuring availability of essential medical products. Because of lack of expertise and the necessary economic and political clout in individual developing countries, they should utilize RECs to enforce competition rules. There are particularly important benefits to be gained in terms of undertaking joint investigations and information exchange. Existing RECs already have an institutional framework that can be adapted to establish mechanisms for regional competition enforcement.