The author, Toby Kasper, is Coordinator of the Access to Essential Medicines Campaign for Médecins Sans Frontières - South Africa.
People concerned by globalisation frequently invoke the spectre of the growing might of corporations, which are seen as claiming ever greater chunks of influence in global policy setting. Rarely has this picture been drawn as clearly as in a recent court case in South Africa, in which the government of the country with more people living with HIV/AIDS than any other was locked into a fierce struggle with an industry doing everything possible to preserve its profits.
Happily, this David-and-Goliath story ended well when the 39 pharmaceutical companies suing the government decided to unconditionally drop their case against the Medicines and Related Substances Control Amendment Act, No. 90 of 1997, albeit after having tied it up in court for more than three years. Thus the final victory must be tempered by its high costs: during these three years, more than 400,000 South Africans have died of HIV/AIDS. Additionally, it is important to recognize that the legal victory alone will not automatically translate into improved care for people with HIV/AIDS; further steps are necessary before the hopes raised by this case - particularly for access to life-saving anti-retroviral medications - can be realized.
Lowering costs, legally
When South Africa emerged from apartheid,
the government was confronted with a problematic pharmaceutical pricing structure:
drug companies had set their prices to target the country-within-a-country of
the rich, white upper class, essentially ignoring the vast number of (black)
people who could not afford these prices. Concerned with matters of equity,
the government passed the Medicines and Related Substances Control Amendment
Act in 1997 to introduce measures to bring down the price of medicines in both
the public and private sectors.
From the hysterical statements emanating from pharmaceutical company representatives, one might have thought that South Africa was trying to introduce radical legislation, abolishing all patent rights. In reality, nothing is further from the truth: the law is consistent with the World Trade Organization's (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), and all of the most important provisions are already enshrined elsewhere around the world, typically in developed countries. For example, generic substitution - the practice of requiring a pharmacist to pre-scribe the cheapest available version of drugs that are not patent-protected, unless the patient specifically requests the originator product rather than a generic alternative - is common in countries such as the U.S, the Netherlands, and Japan.
The creation of a pricing committee with the power to fix a so-called "single-exit price," where the pharmaceutical company sets a single price at which it must sell to all private sector purchasers, is an extremely mild form of price control that is aimed at promoting transparency in pricing and doing away with perverse prescribing practices, such as when a pharmacist is enticed to dispense a particular product as a result of (typically time-limited) discount offers.
The most controversial part of the law - which the pharmaceutical industry argued allows the government to abrogate patent rights with no regard to due process - is Section 15C. The industry arguments on 15C were never likely to succeed, given that they ignored two crucial points.
First, the South African government has insisted, since the law was in draft, form that 15C is aimed solely at enabling parallel importation of medicines (as allowed, for example, within the European Union).
Second, the language of 15C is based on a draft of model language on the exhaustion of rights (through which parallel importation is enabled) prepared by a World Intellectual Property Organization Committee of Experts in 1990. Concretely, the fact that parallel importation will be permitted means that South Africa (both the government and private bodies) can shop around for the lowest price offered globally on medicines marketed by the patent-holder (or under license from the patent-holder); it will not facilitate the introduction of the generic medicines. If South Africa wishes to take advantage of the lower prices frequently offered by generic producers, it will need to issue compulsory licenses, which allow the use of a patented product without the consent of the patent-holder.
Given the weakness of the pharmaceutical industry arguments, it was not particularly surprising that the companies sought a settlement. What was less expected was their complete capitulation.
Bringing the world's most profitable industry
to its knees
It takes a potent combination of factors to compel one of the world's most
powerful industries to completely change course and abandon a cause that it
has pursued relentlessly for more than three years. In this case, a powerful
alliance of public pressure (both within South Africa and inter-nationally),
solid legal argumentation and steely resolve on the part of the government,
and some timely international intervention, all contributed.
The public relations disaster that the court case had turned into was clearly a key factor in forcing the companies to withdraw the case. Activist pressure in the North had driven American and European governments to back away from their earlier pro-industry positions, and the European Parliament and a number of Ministers of various European nations even called on the companies to abandon their lawsuit. In a mere six weeks, 300,000 people from over 130 countries signed an international petition drive launched by Médecins Sans Frontières (MSF) calling on the companies to drop the case (see South Bulletin 09 for more details on the petition).
Within South Africa, the Treatment Action Campaign, a domestic non-governmental organization working on access to medicine for people with HIV/AIDS, had been accepted as an amicus curiae (friend of the court) in the case, which would have ensured that embarrassing details about the pharmaceutical industry's pricing policies and the heavy government sponsorship of the research and development of HIV medicines would have been heard in open court.
While the public pressure clearly brought the
companies to the table, it was the government's commitment to the legislation
and its strong negotiators that guaranteed that the companies were unable to
extract compromises in exchange for dropping the case. It is also clear that
Kofi Annan played an important role in resolving the case, from reports describing
his contacts with both major multinational pharmaceutical companies and South
African President Thabo Mbeki.
Patents, People, and the Future of Multilateral Relations
This court case was never contained to the borders of South Africa, and its
resolution has ramifications throughout the African continent and beyond.
First, the importance of the South African government having successfully stood up to one of the world's most powerful industries in a case that was followed closely from Alaska to Zanzibar cannot be overstated. In many ways, the case was less about the narrow technical provisions to reduce the price of medicines than it was about the rights of a government to place the health of its people over vested corporate interests. As such, it sets an important precedent, signaling to other developing countries that they need not capitulate to the pressure tactics of the pharmaceutical industry or Northern governments acting at their behest.
This case also demonstrates the extent to which the intellectual property rights have become one of the key battlegrounds between developing countries and the interests of multinational firms. When intellectual property rights were included in the WTO during the Uruguay Round of trade negotiations, there was much less awareness of the potential for patent protection to lead to adverse public health consequences than there is today. The HIV/AIDS epidemic, in particular, has made the link between patent protection, high drug prices, and access to medicine painfully clear, as millions die in developing countries, unable to afford the drugs that have turned HIV from a death sentence to a chronic condition in the North.
This catastrophe has sparked calls to reexamine the TRIPS Agreement, and in June the Council for TRIPS will have a special session on the public health impact of the Agreement, a meeting called for by Zimbabwe on behalf of the African Group of WTO members.
At the failed WTO Ministerial in Seattle, there was already one proposal (by Venezuela) to allow countries to exempt some medicines from patentability, and it is quite likely that the forthcoming Qatar meeting will see even more far-reaching initiatives, especially as recognition of the hollowness of claims that stronger patent protection on pharmaceuticals would lead to increased research and development into drugs affecting the poor and to greater foreign direct investment. HIV/AIDS and access to medicine are deeply emotive and politically important issues, and have become the focal point for the movement calling for a reassessment of the TRIPS Agreement.
In this light, the decision to drop the South African court case, and some recent announcements of price reductions on antiretrovirals can be seen as attempts by the pharmaceutical industry to avoid having HIV/AIDS catalyze an international movement seeking to address the problems in the TRIPS Agreement. The companies seem to be increasingly willing to sacrifice the (already marginal) sales generated on HIV drugs in Africa in an attempt to forestall the development of a larger social movement that might ultimately lead to the TRIPS Agreement being significantly altered or even removed from the WTO.
However, given that generic competition from manufacturers in Brazil and India has been a key factor in reducing the price of HIV drugs and in building public awareness about the true costs of manufacturing these medicines, there is a clear need for caution towards the deals that have recently been proposed around HIV medicines, some of which limit the use generics in exchange for reduced prices or aid funds.
One of the other lessons of the court case is that although the multinational pharmaceutical industry finally did the right thing, its resources are such that it can hold up the implementation of legitimate, WTO-consistent legislation almost indefinitely.
In South Africa, this has meant three additional years of high drug prices in the country facing the worst AIDS epidemic in the world. Short-term solutions that compromise the development of more sustainable legal frameworks will only lead to further delays in the arrival of affordable medicines.
To return, finally, to HIV/AIDS, a lengthy period characterized by conflict between developing country governments and the pharmaceutical industry is hopefully drawing to a close. If current trends continue, the major multinational companies will simply offer their drugs at the cost of production and perhaps even relinquish their patent rights. If this comes to pass, the burden of action - and the object of public pressure - will then shift squarely to the governments of developing countries, who will need to act swiftly to provide treatment to people with HIV/AIDS.
Within South Africa, the contested legislation will undoubtedly help reduce prices. However, it will not immediately allow cheaper generic versions of the much-needed anti-retrovirals into the country, and moreover it will not guarantee any improved access to medicine for people with HIV/AIDS.
Further steps -- particularly the issuance of compulsory licenses to ensure access to low-cost generic medicines and a clear commitment on the part of the South African government to provide anti-retroviral treatment -- need to be taken before the real fruits of this triumph can be savoured.
Thus this court case, while a victory, can only be seen as one piece of the much larger puzzle that providing treatment to people with HIV/AIDS represents.