Access to generic efavirenz in South Africa: MSD agrees to grant licenses on reasonable terms
Even though efavirenz is not the preferred first-line option for treatment in South Africa, being reserved for nevirapine intolerance or contraindication, it accounts for over 60% of the total South African ARV drug budget.
Legal action from community groups has resulted in the manufacturer making significant changes to address efavirenz supply and cost. 
Acting on behalf of TAC, the AIDS Law Project (ALP) lodged a complaint with the Competition Commission of South Africa in late 2007 alleging that MSD (Pty) Ltd – the South African subsidiary of multinational drug company Merck – was unlawfully refusing to license the antiretroviral (ARV) medicine efavirenz (EFV) on reasonable terms. 
In a statement on I June, TAC recognise that MSD is now no longer acting in an anticompetitive way, and that this paves the way for the market entry of a wide range of affordable efavirenz products.
According to the ALP’s records and recent correspondence from the Commission, MSD has:
- Licensed four generic drug companies – two local producers and two locally-based importers – to bring stand-alone EFV products to market;
- Agreed that all four licensees are entitled to bring co-packaged products containing EFV to market;
- Agreed that all four licensees will not unreasonably be refused consent to bring co-formulated products containing EFV to market;
- Agreed that all licensed products can be sold to both public and private sectors in South Africa and 10 other southern African countries (Angola, Botswana, DRC, Lesotho, Madagascar, Mauritius, Namibia, Seychelles, Swaziland and Zimbabwe); and
- Waived any right to a royalty.
On the basis of these significant developments, the Commission believes that there is no reason to refer the complaint to the Competition Tribunal for adjudication on what is now largely a historical complaint.
In practical terms, this means that there are now a sufficient number of competitors to ensure that efavirenz prices are kept as low as is reasonably possible. It also means that the public sector, which until relatively recently was paying 64 cents in every rand spent on first-line ARV treatments for efavirenz alone, can now choose to procure from up to five suppliers.
This also has the potential to enable the numerous co-packaged and co-formulated generic products commonly used in sub-Saharan Africa to be able to be used in South Africa.
Impact on price reductions
When TAC and the ALP first started to engage MSD on this issue as far back as May 2002, the company sold a year’s supply of EFV for one adult for US$500. That price has dropped significantly. Today, MSD’s best international price for a year’s supply is US$237.25. In contrast, the best international price for a generic equivalent of proven quality, safety and efficacy is US$150. In the South African private sector, MSD’s EFV sells for R166.90 (VAT inclusive) for a 30 days’ supply. In contrast, the cheapest registered generic equivalent sells for R136.80. These prices are expected to drop even further.
Price differentials in respect of FDCs are even greater. MSD has committed to sell Atripla at US$613.20 per patient per year. In contrast, the Clinton Foundation HIV/AIDS Initiative (CHAI) has managed to secure a commitment from a reputable Indian company to bring generic TDF/FTC/EFV to market for only US$349 per patient per year. The same company has also committed to bringing generic TDF/3TC/EFV – which is considered as therapeutically equivalent to the FTC version of the FDC – for US$299 per patient per year. South Africa is entitled to purchase drugs through CHAI.
- TAC statement: “TAC complaint increases access to efavirenz: MSD finally agrees to grant licenses on reasonable terms”. (1 June 2008)
- TAC Statement: “TAC complains to the Competition Commission about the anti-competitive conduct of the world’s largest pharmaceutical company”