A/HRC/23/42 3. Tariffs 32. Imported medicines usually exact a tariff in the country of import which is normally added onto the cost of a medicine. Half of the surveyed States indicated that a tariff or levy is imposed on imported medicines. Tariffs are indeed applied to finished pharmaceutical products in 38 per cent of countries and to APIs in 41 per cent.41 The States, however, reported having differential policies with respect to import tariffs levied on such specific medicines as antibiotics, antiretrovirals (ARVs), cancer drugs and vaccines, which is a positive practice and can help reduce the prices of these life-saving medicines. 33. At the same time, for 92 per cent of all States, tariffs contribute less than 0.1 per cent of their gross domestic product and hence hold little economic value.42 However to promote local production States may consider the strategic value of tariffs on particular medicines. For instance, tariffs on imported finished products that are already manufactured locally have a stronger economic and social basis in promoting local production. The Special Rapporteur therefore encourages States to revise tariff policies in light of the lack of evidence of their economic value to State revenues, whilst allowing for tariffs that incentivize local production. 4. Taxes 34. Taxes constitute the third largest component in price add-ons for medicines after the manufacturer’s price and distribution mark-ups paid by the consumer.43 At the country level, the tax range for medicines is between 5 and 34 per cent.44 These can include State tax, stamp duties, community tax, State excise duties and freight tax. Taxes are applied variably depending on whether a medicine is locally produced or imported and sold in the in the public or private sector.45 Almost half of the States surveyed reported that taxes are not levied on medicines. Of those in which they are, some provide exemptions for medicines listed on the national essential medicines lists, donated medicines, antiretroviral drugs, imported generic medicines, cancer and diabetes medicines. The Special Rapporteur encourages States to refrain from taxing medicines, especially essential medicines, and instead consider other ways to generate revenue for health, such as so-called sin taxes – excise taxes levied on socially harmful goods such as tobacco, alcohol and junk foods.46 5. Manufacturer’s pricing policies 35. Pricing policies of pharmaceutical industries greatly impact the affordability of medicines. Under the right to health, pharmaceutical companies have a shared responsibility to ensure that the prices of their medicines do not put them out of the reach of a majority of the population. Earlier tiered pricing of essential medicines was the norm, whereby essential medicines were sold systematically at a lower price in developing countries as compared to developed countries. Later many multinationals however opted for universal tiered prices. Tiered pricing policies have now re-emerged. Some multinational companies now engage in tiered pricing between and within countries, based 41 42 43 44 45 46 Müge Olcay and Richard Laing, “Pharmaceutical Tariffs: What is their effect on prices, protection of local industry and revenue generation?”, prepared for the Commission on Intellectual Property Rights, Innovation and Public Health (2005), p. 35. Ibid., pp. 2 and 38. Andrew Creese, “Sales Tax on Medicines, Review Series on Pharmaceutical Pricing Policies and Interventions”, Working Paper 5, WHO/HAI Project on Medicines Prices and Availability (2011), p. 13. Ibid. Ibid. A/67/302, para. 17. 11