52003XC1220(02)

Notice of initiation of an examination procedure concerning obstacles to trade within the meaning of Council Regulation (EC) No 3286/94, consisting of measures imposed and practices followed by the Republic of Turkey affecting trade in pharmaceutical products

(2003/C 311/04)

On 9 October 2003, the Commission received a complaint under Article 4 of Council Regulation (EC) No 3286/94(1) (hereinafter "the Regulation").

1. COMPLAINANT

The complaint was lodged by EFPIA (European Federation of Pharmaceutical Industries and Associations) on behalf of Community member firms exporting or wishing to export to the Republic of Turkey the products covered by the complaint. EFPIA is a non-profit making association whose functions are to promote the pharmaceutical industry and to act for it in pursuit of its scientific, technical, economic and legal objectives.

2. PRODUCTS

The products concerned are pharmaceutical products falling under the following Combined Nomenclature headings: 2936-2939, 2941 and 3001-3006.

However, the examination which the Commission is initiating may also cover other products, particularly those which interested parties making themselves known within the time limits mentioned below (see Section 8), can show are affected by the alleged practices.

3. SUBJECT

The complaint concerns obstacles to trade allegedly caused by Turkish practices and measures involving lack of transparency, discriminatory application of the pharmaceutical import, sales and marketing system, including discrimination in pricing and pharmaceutical marketing approvals procedures and distribution channels. The complainant also identifies a lack of protection of commercially sensitive data submitted as part of the marketing approval procedure.

4. ALLEGATIONS OF OBSTACLES TO TRADE

EFPIA claims that the Turkish practices referred to in Section 3 constitute obstacles to trade within the meaning of Article 2(1) of the Regulation. These are the following:

(a) Discriminatory application of the pharmaceutical import, sales and marketing regime including the regime for setting of market prices, for the setting of margins and reimbursement, local production requirements and distribution

The complainant alleges that there exists in the Republic of Turkey discrimination in law and practice in the application of the pharmaceutical import, sales and marketing system, including pharmaceutical marketing approvals procedures and distribution and the pricing and reimbursement regimes to the detriment of imported drugs. This leads according to the complainant to unfavourable treatment of imported pharmaceutical products compared to locally produced innovative and generic products and privileges in the reimbursement regime reserved for Turkish products.

EFPIA claims that these practices are in breach of Article I of GATT 1994 (MFN principle), Article III.4 of GATT 1994 (National Treatment principle), Article X.1 of GATT 1994 (transparency and publication of laws and regulations), Article X.3(a) of GATT 1994 (uniform and impartial administration/application of laws and regulations) and with Articles 2.1 and 2.2 TBT Agreement (application of technical regulations). Furthermore, the complainant alleges that the Turkish trade practices and measures are in violation of Article XI:1 (prohibition of bans) and Article 2 of the TRIMs Agreement (prohibition of trade-related investment measures in violation of GATT Articles III and XI).

(b) Other alleged obstacles to trade

The other alleged obstacle to trade involves the lack of protection for commercially sensitive data submitted as part of the marketing approvals procedure. EFPIA claims that this amounts to a clear violation of Article 39.3 of the Agreement on Trade Related Intellectual Property Rights (TRIPS).

Finally, the complainant argues that taken together, the impact of the various arbitrary regulatory processes and procedures and the lack of transparency amount to a breach of Turkey's obligations under GATT 1994 Article XXIII:1(b).

In light of the factual information available and the evidence submitted, the Commission believes that there is sufficient prima facie evidence that the Turkish measures and practices as above, including in particular the discriminatory application of the pharmaceutical import, sales and marketing system plus distribution and pricing measures and margins, discriminate against imported products and therefore appear to be contrary to the above-mentioned Articles.

5. ALLEGATION OF ADVERSE TRADE EFFECTS

EFPIA claims that its members are suffering adverse trade effects within the meaning of Article 2(4) of the Regulation and they are in danger of being more adversely affected in the near future.

The main evidence of adverse trade effects of the Turkish non-transparent, discriminatory and trade restrictive legislation and practices pertains to sales and revenue losses due mainly to the discriminatory and opaque operation of pricing and reimbursement systems. Furthermore, other effects are attributed to the local production requirements which entail significant costs for the European pharmaceutical industry and reduced competitiveness due to its inability to capture economies of scale. This in turn has significant implications in terms of loss of investments, tax revenue and employment due to the obligatory relocation of production to Turkey.

Also the evidence submitted on trade losses refers to other effects of these barriers due to the alleged misappropriation and misuse by Turkish enterprises of data developed by Community enterprises which is then used for the production and marketing approval of copies of innovative products.

This appears therefore to be prima facie evidence of adverse trade effects within the meaning of Article 2(4) of the Regulation.

6. COMMUNITY INTEREST

The pharmaceutical industry is a major employer in the EU: in 2001 the sector employed around 580000 people. Exports represent an important component in the industry's turnover, around 19 %.

In this respect, it appears essential to safeguard the equal treatment of EU pharmaceuticals in fast growing third country markets such as Turkey by removing obstacles to trade. Furthermore, it is also important to ensure that the EU's trade partners fully comply with their obligations under the WTO Agreements. The Community also has an interest in ensuring a proper implementation of the EC-Turkey Customs Union Agreement, which establishes a particularly close relationship between the EU and Turkey. Many of the issues raised in this TBR complaint have already been the subject of discussions within the framework of the EC-Turkey Customs Union Joint Committee, the EC-Turkey Association Committee and the EC-Turkey Association Council, although so far no satisfactory solution has been found. In the course of this investigation, the Commission will continue to explore the scope for finding a solution to the market access obstacles through bilateral dialogue, taking also into account the obligations assumed by Turkey under the EC-Turkey Customs Union Agreement.

In view of the above, it is considered to be in the Community's interest to initiate a TBR examination procedure.

7. PROCEDURE

Having decided, after due consultation of the Advisory Committee established by the Regulation, that there is sufficient evidence to justify initiating an examination procedure for the purpose of considering the legal and factual issues involved, and that this is in the interest of the Community, the Commission has commenced an examination in accordance with Article 8 of the Regulation.

Interested parties may make themselves known and make known their views in writing on specific issues raised by the complaint, providing supporting evidence.

Furthermore, the Commission will hear the parties who so request in writing when they make themselves known, provided that they are fundamentally concerned by the result of the procedure.

This notice is published in accordance with Article 8(1)(a) of the Regulation.

8. TIME LIMIT

Any information relating to the matter and any request for a hearing should reach the Commission not later than 30 days following the date of publication of this notice and should be sent in writing to:

European Commission Directorate-General for Trade Mr. Ignacio García Bercero, DG Trade D.3 CHAR 9/74 B - 1049 Brussels Fax (32-2) 299 32 64

(1) Council Regulation (EC) No 3286/94 of 22 December 1994 laying down Community procedures in the field of the common commercial policy in order to ensure the exercise of the Community's rights under international trade rules, in particular those established under the auspices of the World Trade Organisation (WTO) (OJ L 349, 31.12.1994, p. 71). Regulation last amended by Regulation (EC) No 356/95 (OJ L 41, 23.2.1995, p. 3).