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. One likely reason why governments have increased the number of tariff lines is that they are trying to replace the revenues they have forgone as a result of the reduction in overall tariffs with an increase in the number and categories of products subject to tariffs. Other countries with relatively high tariffs recognize the regressive nature of drug import duties and have taken steps to remove the most counterproductive examples. It should be noted that Thailand, which agreed in April 2019 to exempt orphan drugs (for rare diseases) from import tariffs. Local news reported that the decision was motivated by the need to reduce the price of these drugs that cannot be manufactured on site. Although the move will cost the Thai government about $0.6 million a year, money would have been ultimately paid by the sick. 7 This encouraging trend towards the liberalization of drug tariffs over the past two decades reflects a general global shift towards lower tariffs, in addition to the implementation of the 1995 WTO Pharmaceutical Agreement, a WTO multi-lateral sectoral agreement whereby signatories agree to a reciprocal removal of tariffs , which will be extended to all WTO members (see later in this research crisis). Since the inception of the agreement in 1994, new pharmaceutical products and active substances (APIs) have emerged. Regular updates have not kept pace, the last one a decade ago. By some estimates, there are currently up to 1,000 finished products and 700 ingredients that are not currently on the list and are therefore subject to tariffs if negotiated under WTO conditions. 8 The world drug trade is governed by a 1995 agreement, known as the « Drug Abolition Agreement » and negotiated by the WTO. This was introduced to specifically prevent a nation from becoming dominant and also to allow the dissemination of medical aid wherever it is needed, and unimpeded because of import duties.
It is a zero-for-zero initiative to eliminate tariffs in a given industrial sector. Pharmaceutical tariffs are essentially regressive taxes, because they take up a larger share of the income of the poor than for those with a higher income scale – in fact, pharmaceutical tariffs are doubly regressive, because the poorest people most affected suffer from diseases. However, since the ratification of the pharmaceutical agreement, the tone of the global drug trade has changed considerably. Overall, trade increased in both value and volume, with emerging economies being important trading partners. As a result, the Zero for Zero initiative, while still significant, represents a decline in the share of global pharmaceutical trade. Between 2006 and 2018, drug imports outside the WTO pharmaceutical agreement increased from $39.7 billion in 2006 to $65.73 billion in 2018, representing an annual growth rate of 4.28% over 12 years (Chart 10).