Drug companies withdraw HIV drug lawsuit against South Africa

17 May 2001. Related: Treatment access.

The Pharmaceutical Manufacturers Association of South Africa and 39 pharmaceutical companies today agreed to drop their lawsuit against the South African government over a law that would allow the country to import and manufacture cheaper generic HIV drugs, the South African Broadcasting Corporation reports (South African Broadcasting Corporation, 19/4).

The BBC News reports that AIDS activists cheered when the announcement was made after a hearing that “lasted less than a minute” (BBC News, 19/4).

In an “unconditional surrender,” the drug companies agreed to accept “virtually all of the legislation,” but are urging the government to rewrite a “key section” of the law “to clarify and limit the circumstances in which it can grant compulsory licenses for third parties to manufacture patented medicines at a lower price.” Britain’s Guardian reports that South Africa has not indicated whether it will “give ground” on this issue, but the government has already said that its “primary interest” is not manufacturing copies of patented drugs, but importing and manufacturing generic drugs (McGreal, Guardian, 19/4).

Under the agreement, South Africa “promise[d]” that the implementation of its 1997 Medicines and Related Substances Control Act would comply with the rules of the World Trade Organization. The Wall Street Journal notes that this was a “promise the government has agreed to make for years, but the industry had long insisted wasn’t enough” (Block/Harris, Wall Street Journal, 19/4). The drug companies also agreed to pay costs incurred by the South African government related to the lawsuit.

Avoiding a PR ‘Disaster’

With today’s withdrawal of the suit, the pharmaceutical companies “will stave off another public relations disaster,” the Guardian reports.

The industry has faced a “groundswell of public and government opposition,” which caused some of the largest firms involved in the case to rethink their strategy. In addition, if the case continued, the companies faced having to reveal some of their most closely guarded business secrets, such as pricing policies, profit levels and the source of funding for HIV drug research.

Brenda Wilson reports on “Morning Edition” that the “industry realized that this was a losing proposition. [South Africa] is a very small market … less than 2% of their [total HIV drug] market….I think they saw that even if they won the case, their image would suffer in the long term” (Wilson, “Morning Edition,” NPR, 19/4). The Guardian reports that a split had developed between the Pharmaceutical Manufacturers’ Association and some of the larger firms in the case, who now say that the case “should never have been pursued” and who were “disturbed at the content of some submissions by PMA lawyers.” For example, the trade group had argued that “unless there were financial returns there was little incentive for drug companies to develop new HIV treatments”. In an effort to stave off increasing damage to their collective image, five companies that manufacture HIV drugs – Merck & Co., GlaxoSmithKline, Bristol-Myers Squibb, Boehringer Ingelheim and Roche – pushed hard for a settlement. The remaining companies reluctantly agreed to go along (Wall Street Journal, 19/4). The Guardian notes that the drug industry “has ultimately achieved the very thing it tried to prevent – encouraging governments across the developing world to use the law to obtain more affordable drugs”.

The case “will go down in history … as one of the great corporate PR disasters of all time,” and the “hard lesson that the big pharmaceutical companies have been taught … is that there can be no global marketplace without a world sense of right and wrong” (Denny/Meek, Guardian, 19/4).

Great Expectations

South African officials indicated that they were ready to implement the law “within weeks” once the legal challenge was dropped. PMA CEO Mirryena Deeb said that the South African government had agreed to consult the drug firms when drafting regulations to implement the law. BBC News noted that the “pressure will now be on the government to come up with a treatment plan for the 4.7 million people estimated to be HIV-positive” in South Africa.

During settlement negotiations, the industry originally promised to help “run partnerships on AIDS programs.” But South African President Thabo Mbeki faxed back a change in the settlement draft – crossing out “AIDS” and replacing it with “communicable diseases.” This move “chilled” some in the industry as a reminder of Mbeki’s “oft-cited belief that AIDS is simply a disease of poverty, not of infection with [HIV].” However, South Africa’s drug regulatory body, the Medicines Control Council, yesterday signalled their commitment to curbing the AIDS epidemic by finally approving nevirapine, a drug that reduces the risk of vertical HIV transmission, after a seven-month delay. But a longstanding pilot project to give the drug to 90,000 expectant mothers across the country still awaits cabinet approval.

The cabinet is “reportedly concerned about what it calls the long term cost implications” of the program. In July last year, Boehringer offered to donate the drug to South Africa free of charge for a period of five years, but it “is still not certain” that the government will accept the offer (Wall Street Journal, 19/4).

Implications for Brazil

As the South African case draws to a close, attention now shifts to the suit being brought by the U.S. government and the Pharmaceutical Research and Manufacturers Association of America against Brazil. The plaintiffs argue that Brazil, which manufactures cheap copies of patented HIV drugs, is “flouting” the Trade Related Aspects of Intellectual Property Rights agreement. The Guardian notes that Brazil differs from South Africa in that the country is “much richer” and is a “genuine potential market” for AIDS drugs.

But the country’s supporters say Brazil is a “successful example of how a relatively poor country can treat AIDS if it has access to cheaper generic drugs,” as the number of AIDS deaths in the country have halved since the government began offering reduced-cost treatment. In light of the South Africa case, the Guardian notes that Merck and Pfizer, which are leading the campaign against Brazil’s generics industry, “must be re-evaluating their strategy. But it will be harder for big drug companies to admit defeat on this one”.

South Africa AIDS Drug Settlement May Not Signify Immediate Influx of Drugs

South Africa’s Health Minister Manto Tshabalala-Msimang “dropped a bombshell” yesterday when she announced that the government had “no immediate plans to use the landmark legal victory” to obtain antiretroviral drugs, the Wall Street Journal reports.

Speaking before a “packed” conference room, the health minister said, “We never said we want to use antiretrovirals. But we have to place our options on the table to see what we will use.” Tshabalala-Msimang added that the drugs are “still too expensive, too dangerous and too difficult to manage for the government to incorporate them into its AIDS-fighting plans.” She said that the government would instead focus on “nutrition programs and better treatment of infections.” Following the health minister’s statement, Zackie Achmat, chair of the South African Treatment Action Campaign, said that activists would “work to persuade the government to change its position on antiretroviral drugs.”

The Journal notes that the case over the South African law was “technically about patent rights, not HIV medication per se.” However, the issue of HIV drugs was brought to the forefront as AIDS activists used the high cost of antiretrovirals as a “symbol of barriers preventing poor Africans from getting treatment” (Block, Wall Street Journal, 20/4). The Guardian added that “large numbers of people … regarded the court battle as primarily a struggle for drugs to combat the pandemic” (McGreal, Guardian, 20/4).

Government, Pricing Not the Only Problems

The government’s attitude toward AIDS drugs is not the only obstacle to obtaining treatment for South Africa’s 4.7 million HIV-positive patients. The Los Angeles Times reports that many state hospitals “lack equipment and medicine to treat even basic illnesses,” that there is a shortage of doctors and nurses and that “poor roads and communications hamper access to medical facilities in rural areas.” In order to make effective use of antiretrovirals, officials estimate that South Africa needs to invest “at least” $1.25 billion over the next 10 years to bolster its health care infrastructure (Simmons, Los Angeles Times, 20/4).

The New York Times reports that “the most sweeping aspects of the South African law will not take effect for several months and it seems unlikely that they will dramatically improve access to AIDS drugs in [the] country.” Even cheaper generic HIV drugs sold outside of South Africa are “still too expensive” for most of the country’s residents (Swarns, New York Times, 20/4). Achmat said, “We have won the first round, but there is a lot ahead that we have to do. We need a much firmer commitment and political commitment from our government.” And John Kearney, general manager of the South African division of GlaxoSmithKline, said, “I feel genuine sadness for those who perhaps believed that the pricing of antiretrovirals was the only barrier (to treatment) and that that barrier would come down as a result of this court case. If people’s hopes have been raised prematurely by that then that’s a great shame” (Nessman, Associated Press, 19/4).

In a statement issued by a spokesperson, U.N. Secretary-General Kofi Annan said that “he hopes that [the outcome] … presages a new era of cooperation between governments and the private sector in the struggle for better health care throughout the developing world,” adding that the “credit for this positive outcome goes to the wisdom and perseverance of the parties concerned, and to the constructive intervention of President Thabo Mbeki” (U.N. release, 20/4).

However, South Africa’s Business Day reported that “Government may have won a glorious battle … but Pretoria risks losing the war unless Health Minister Manto Tshabalala-Msimang takes a more enlightened and sophisticated approach” to dealing with HIV/AIDS (Agence France-Presse, 20/4).

Global Implications

While the case settlement may not spur an immediate flood of antiretrovirals into South Africa, it may serve to “embolden people in developing countries around the world to stand up for medicines that are affordable,” TAC’s Mark Heywood said (AP/Richmond Times-Dispatch, 20/4). Oxfam, Medecins Sans Frontieres and TAC said in a joint statement, “The outcome of the case signals a dramatic shift in the balance of power between developing states and drug companies.”

BBC News reports that the settlement “could become a blueprint for future relations between pharmaceutical companies and governments in the developing world”. In particular, the case may bode well for Brazil, India and Thailand – three countries currently manufacturing generic HIV drugs. In Thailand, for example, AIDS patients and activists are planning a legal challenge to “the validity of a Bristol-Myers Squibb patent on an HIV drug.” And Brazil, which already permits generic production of some HIV drugs, has also “threatened” to grant licenses to local companies on patents on HIV drugs held by Merck & Co. and Hoffman-La Roche (Pollack, New York Times, 20/4).

I.S. Gilada, one of India’s “most prominent AIDS experts,” described the settlement as a “‘major triumph’ for all developing countries and said it would throw the doors open to a market worth a fortune for Indian companies,” Agence France-Presse reports. Indian drug firms involved in manufacturing generic drugs include Cipla, Zydus Cadila, Aurobindo, Sun Pharmaceuticals and “two to three smaller firms,” Gilada said. In addition, several new Indian companies are expected to enter the generics market. Mukhu Hamied, joint managing director of Cipla, predicted that international HIV drug prices “will come down to a tenth of what they are now.” He added, “This is a terrific victory and opportunity for South African citizens. They will be able to get generic drugs from generic drug suppliers at affordable prices.”

Cipla is currently involved in direct talks with governments of several African countries regarding the sale of its triple drug cocktail. Hamied said, “We expect to reach an agreement with the Nigerian government by the end of this month. We are also talking to the government of Cameroon. Our registration process is on in countries such as Laos [and] Thailand” (Mukherji, Agence France-Presse, 20/4).

Generic Drug Quandary

On a broader level, the settlement “threaten[s] moves toward more globalisation,” the New York Times reports. Eight years after most nations approved the Trade-Related Aspects of Intellectual Property Rights agreement, which “commits [countries] to enforce drug patents,” the agreement is “coming home to roost,” Jim Keon, president of a trade group representing generic drug companies in Canada, said.

The Times suggests that pharmaceutical companies are now offering reduced-cost drugs in developing countries to help protect their patents and stave off manufacture of cheaper generic drugs. But AIDS activists maintain that “it is better to rely on competition from generic manufacturers than on voluntary actions by big drug companies.”

However, the Times notes that even if developing countries are given the leeway to manufacture their own generic versions of patented drugs, “it is not clear if African countries have the scientific expertise for a research-oriented drug industry” (Pollack, New York Times, 20/4).

Source: Kaiser Daily HIV/AIDS Report

Treatment Action Campaign:
http://www.tac.co.za

The Guardian:
http://www.guardianunlimited.co.uk/aids/story/0,7369,475511,00.html

Oxfam:
http://www.oxfam.org

Medecins Sans Frontieres:
http://www.msf.org