SUNS4507 Tuesday 14 September 1999

Trade: U.S. Drug Companies Ease Up on South Africa

Mexico City, Sep 12 (IPS/Gumisai Mutume) -- The decision this week by a group of U.S. pharmaceutical companies to suspend a lawsuit against South Africa, over the use of drugs for treating AIDS, generally raised hopes such drugs will become available to millions of South Africans.

But a leading health analyst says the move may be only a calm before a new storm over the treatment for AIDS.

"The suspension of the lawsuit might well be interpreted by South Africa as a signal that they can begin the manufacture of cheaper versions of the most widely-used drugs to treat HIV," Richard Levinson of the American Public Health Association (APHA) told IPS.

"However, it is not clear to me that the drug companies might later re-institute their suit if the promised changes in relevant South African legislation does not satisfy them," says Levinson, Associate Executive Director for Programs and Policy at APHA.

"It seems unlikely that pharmaceutical firms will surrender their profit margins without a major battle. Therefore, this may be a lull before the storm, he said."

More than 40 research-based pharmaceutical companies that were challenging the legality of a South African law allowing the manufacture of cheap generic drugs, announced suspension of the lawsuit on Thursday.

The Pharmaceutical Research and Manufacturers of America (PhRMA) which represents the companies, says the action came after South African Health Minister Mantombazana Tshabalala-Msimang revealed that the law would be re-drafted.

South African authorities, however, did not indicate what changes would be made to the legislation.

The South African Medicines Act passed in 1997 and a related regulatory bill gives the minister powers to ensure that patent rights over any medicine cannot stop the South African government from issuing a licence to produce the same medicine in South Africa in the interests of public health.

The legislation also allows parallel importation of such drugs from countries, such as India, which produce cheap drugs.

The act has not been enforced, apparently because of the PhRMA lawsuit before US courts, despite mounting pressure from health non-governmental organisations.

An estimated 4 million of South Africa's 41 million population are HIV positive. Infection also is high in many other developing countries which together, account for about 95 percent of people with HIV worldwide.

The dispute had attained such a magnitude that the US Government has put it forward for settlement by the World Trade Organisation (WTO) citing the South African government as breaching international patent agreements.

It is not clear whether the new developments will change the US position at the WTO which meets at ministerial level in November in Seattle.

US newspapers have carried stories of criticism directed at Vice President Al Gore, a supporter of the pharmaceutical companies' lobby, by minority and human rights groups for his apparent indifference to the health needs of poor countries like South Africa.

Under WTO rules, when a patent still applies, no other company can produce the same product without paying royalty and licences fees to the patent holder

In the case of HIV/AIDS drugs, this means South Africa would still have to wait until 2006 before legally, and freely, producing AZT and other HIV/AIDS drugs.

Compulsory licensing, legal in certain cases under WTO would make it possible for South Africa to legally produce HIV/AIDS drugs before the end of the patent.

While the South African minister has not commented on the issue, the PhRMA statement says Msimang-Tshabala has indicated that early next year she will return the law to parliament for amendment to "correct the flaws" incorporated in the current legislation.

"Medicines are very expensive in South Africa. We pay similar prices for medicines as in the USA. We pay more for medicines than Portugal or Spain. South Africa is very profitable for drug companies," notes the Treatment Action Campaign (TAC) a coalition of NGOs in South Africa campaigning for affordableHIV/AIDS drugs.

"But South Africa has a big health problem - we have 3.5 million people living with HIV/AIDS and many more die from preventable diseases. How do drug companies justify making big profits in South Africa? Is this moral? We believe not."

The problem facing many developing countries is lack of resources to subsidise health. The average African nation spends 10 dollars per person a year on health while the mix of drugs and inhibitors to fight AIDS cost 12,000 dollars per person annually.

Even the relatively cheaper drugs such as AZT are out of reach and many developing countries have resorted to copying them - sometimes for a tenth of the patented cost.

PhRMA which represents America's leading research-based pharmaceutical and biotechnology companies says it invests about 19 billion dollars a year in discovering and developing new medicines. Pirating discourages the search for new drugs.

"Gore's greed kills" are some of the chants that have greeted the U.S. vice president and presidential candidate for next year's elections Al Gore on the campaign trail as pressure groups in the United States tried to force their government to come to the aid of the developing world's growing AIDS epidemic.

But the interests of American pharmaceuticals remain an overwhelming driving force behind US policy on drugs and poor nations.

TAC had scheduled a picket in Johannesburg on September 22 to protest the lawsuit. Between the time when the case was filed and now, TAC says 900,000 new cases of HIV have been reported in the country.

Like the rest of the developing world, South Africa faces the dilemma whether to honour its international trade agreements such as WTO or to skip them and allow access to cheap drugs to its population.

India, which has allowed free production of patented drugs, is also listed by the United States as an "unfair" trader.
In an effort to ward off US sanctions over its breach of international trade regimes it enacted a new Patent Act this year granting monopolies to drug and agro-chemical trans-nationals. But Indian activists say the Patents Act ignores the interests of ordinary Indians who will now have to pay huge royalties on ordinary drugs and agro-chemicals.

This is despite the fact that WTO Trade Related Aspects of Intellectual Property Rights (TRIPS) allows member states exemptions on grounds of public health and interest.

In recent years Thailand also has been pressured by the Clinton administration and drug multi-nationals forcing it to curb the manufacture of cheap drugs and their import.

PhRMA President Alan F. Holmer says "... complex disputes such as this one are best solved through efforts at the local level.... All parties are hopeful that South Africa - with the help of the international community - will be able to address its serious public health problems, including the AIDS crisis, while upholding strong international standards of intellectual property which ensures future innovation."