A war over drugs and patents

 The Economist, March 8, 2001

When it comes to disease, rich countries are quick to share their wealth. For centuries, tuberculosis, measles and other ailments made inroads into much of the poor world, courtesy of the West. But they are less ready to share their pharmaceutical solutions to these and other ills.

Drug making is an expensive business, and pharmaceutical companies have largely concentrated their attentions on markets in industrialised countries (see chart below). This is where they can recoup their hefty research, development and marketing costs. While millions of people in poor countries share an equal or greater need for these medicines, they lack the money to buy them at western prices. How to increase poor people’s access to costly, life-saving drugs is one of the most vexing questions facing governments, drug companies and medical charities.

South Africa believes that it has come up with a solution. Four years ago, the government drafted laws that would give it more flexibility in procuring medicines either from homegrown sources or from cheaper foreign exporters, and has been working on the details ever since. In response, 39 pharmaceutical firms are suing the government because, they claim, the changes would contravene South Africa’s constitutional protection of their patent rights. The case, which began on March 5th, has been adjourned until April 18th. But the war of words outside the court continues. 

The government’s argument is that hundreds of thousands of South Africans die every year from diseases, such as AIDS, tuberculosis and malaria that could be cured, prevented or alleviated with drugs. Many of these are unaffordable, because of patents, which allow the inventors a monopoly of 20 years from the date the patent is filed (ie, roughly ten years from the time the drug reaches the market). In order to save lives, the government says it should sometimes be allowed to infringe these patents. 

According to Patricia Lambert, legal adviser to the health minister, the government has proposed several ways of doing this. One is to allow “parallel imports”. This means that if the state can find cheaper supplies of a patented drug abroad than it can in South Africa, it may import them from a country with weaker patent laws without the patent-holder’s permission. An alternative is to allow “compulsory licensing”. That means that, if the government deems a drug too costly, it can license a local generic manufacturer to make it more cheaply or buy a generic version from another country.

The drug companies argue that South Africa’s proposed compulsory-licensing law gives the health minister too much discretion. She will, they say, be able to grab their ideas without proper legal authority, and without adequate compensation.

South Africa is unusual: it is really a small rich country within a large poor one. Under apartheid, the government was mainly concerned about the rich enclave, so the country adopted western patent laws. Western pharmaceutical firms are anxious at the prospect of generic copies entering South Africa; they fear that these will leak out of the public health service and into the more lucrative private market in South Africa, or as far away as Europe or America.

Last year, five companies offered certain African countries, including South Africa, discounts of 70-90% on several drugs to treat HIV infection. Few governments took up the offers. A price war is now breaking out as drug companies fall over themselves to fight the threat of generic products and regain a toehold on the moral high ground. Merck, an American company, said this week that it was cutting the price in Africa of two of its AIDS-fighting drugs to a tenth of what the drug costs in America. Other companies plan to follow suit.

But the South African government argues that the drugs are too expensive, even at bargain-basement prices. Although a couple of Indian companies have offered to sell generic or copycat versions of some of the most expensive anti-HIV drugs at prices that are a fraction of those on the private market—and have been challenged by GlaxoSmithKline for doing this in Ghana—the South African government claims that even that is too much for the public sector to afford, and that other means must be found.

The South African case has provoked hysterical claims on both sides, with drug companies accusing the government of patent piracy and AIDS activists accusing the drug firms of genocide. The truth, unsurprisingly, lies in the middle or elsewhere. Without patents, the AIDS drugs would not even exist. And although patents are clearly an obstacle to the distribution of the drugs, they are not the only one. Many poor countries have no patent laws at all, but still cannot afford even the cheapest generic drugs. Most African AIDS sufferers need adequate food and clean water before they need drugs.

South Africa has at least 4m HIV-positive citizens (out of a population of 43m), almost none of whom can afford anti-AIDS drugs. The government admits that, even if AIDS drugs were far cheaper, it would still be hard to get poor, illiterate patients to take the correct doses of dozens of pills at the correct time and with regular meals, as is required. In many rural areas, it would be impossible. Even in cities, health services are erratic—about 50% of drug stocks are reckoned to be stolen from public hospitals and clinics. It would, however, be feasible to cut the transmission of AIDS from mother to child during childbirth by about 50% if the government would make generally available a simple, and cheap, treatment. It is reluctant to do so, though, partly because of its deep-seated hostility to the drug companies.

Harvey Bale, the head of the International Federation of Pharmaceutical Manufacturers’ Associations, worries about the precedent that a defeat for the drug companies in a South African court would set. He fears that other poor countries, which may also have profitable markets among their rich minority, will follow the lead and alter their patent legislation. Kenya has already announced imminent changes to its laws to allow the import of cheap generic drugs. 

The European Commission has recently endorsed the idea of discounted prices for poor countries, and drug firms are fearful of how politicians in America will respond. The companies are all too aware that fighting this sensitive battle does nothing for their image as a caring, sharing industry.