The FTC has found cases in which generic drug manufacturers have entered into anti-competitive agreements to control generic medical technology and secondary markets. For example, in 2000, the FTC found that four companies had entered into exclusive licensing agreements for the supply of raw materials for the production of lorazepam and clorazepat, resulting in a dramatic increase in the prices of these products. In order not only to discourage such behaviour, but also to compensate the public for welfare losses suffered, the FTC ordered a company to pay US$100 million to consumers and public authorities who have suffered losses due to excessive prices. As we have seen, many governments do not impose tariffs on drugs and can therefore say that they do not have a zero tariff. Others impose tariffs on some, but not all, 8-digit pharmaceutical subcategory. The more customs posts in a court (“tariff cover”), the greater the proportion of its imported medicines that are potentially subject to tariffs. During the Uruguay round, some WTO members also agreed to harmonize tariffs on chemicals and reduced them to zero, 5.5% and 6.5%, so-called “chemical harmonization”. Despite these encouraging developments, some governments continue to apply tariffs on medicines. The highest rate in the world is 20%, as is found in Pakistan. South Asian countries, Nepal, Pakistan and India have three highest average tariffs in the world.
Latin America is another hot spot for drug tariffs, with Argentina and Brazil imposing average tariffs of nearly 10%. The EU asserts that the 1994 Pharmaceutical Tariff Elimination Agreement (Pharmaceutical Agreement) provides for the abolition of tariffs on finished pharmaceuticals, as well as on active substances defined by WHO`s international non-owner names and intermediate products. Based on an in-depth review of a sample of 219 medical drugs during the 2000-2007 period in 17 EU Member States, the final report found that the first generic version of the drugs developed during this period had been put on the market on average more than seven months after the loss of exclusivity of the initiating drug. This research note seeks to identify key trends in pharmaceutical tariffs since the early 2000s, in particular average tariffs and the individual product coverage scale according to tariffs. Finally, it calls for international action to force governments to reduce tariffs on medicines and vaccines. Follow-up studies carried out by the European Commission on the pharmaceutical sector survey (see Box 4.23) have shown that the number of patent comparisons that are problematic under EU cartel and abuse rules has decreased considerably in the years following the publication of the report. The third European Commission report on the control of patent applications in the pharmaceutical sector, published in July 2012, confirmed that, although the total number of comparisons concluded has increased considerably, the share of problematic comparisons for competition has stabilised, compared with 21% in the results of the sector survey.