The hopes of millions of South Africans and fellow Africans will be pinned on the outcome of the court case between 41 pharmaceutical companies and the government which starts in Pretoria today.
Led by the Pharmaceutical Manufacturers’ Association (PMA) of South Africa, a trade association representing the research-based pharmaceutical industry, legal action was instituted against the government in February 1998 to defend the industry’s patent rights.
Action on the part of industry is specifically aimed at Section 15C of the Medicines and Related Substances Control Amendment Act (No 90 of 1997), which – according to the PMA – allows for the “abrogation of all patent rights for any pharmaceutical upon ministerial discretion”.
The department would ‘defend this costly action to the fullest extent’ It allows the government to buy drugs from countries where prices are already lower – thus trading in parallel with local sellers of the same drugs.
The PMA said the health department had argued in 1997 and 1998 that Section 15c was intended purely to enable the government to occasionally parallel-import a product it believed might be overpriced in South Africa.
PMA’s chief executive officer Mirryena Deeb said the government had since announced that Section 15C was “model legislation designed to allow for compulsory licensing and parallel trade”.
Director-general for health Dr Ayanda Ntsaluba said the department would “defend this costly action to the fullest extent because it is so fundamental to transforming South Africa’s highly inequitable healthcare system” so that even the poorest sections of society benefited.
Jackie Achmat of the Treatment Campaign (TAC) confirmed that the activist group would apply today to join the case as a friend of the court.
‘They have less to do with the manufacturing’ “We believe the patents system as it stands is undermining the right of access to medicines. We’re prepared to use the existing patent system, but would like to see an international body re-examine it and put healthcare above patent law. We need to find a way that people get rewarded for their efforts, but at the same time ensure there’s no obstacle to making medicines more affordable.”
When questioned on the high prices of their drugs, pharmaceutical companies blamed research and development costs for the high costs of innovator drugs.
But analysis of the top 12 drug manufacturers in America in 1999 showed that their median percentage of revenue dedicated to research and development was 12,4 percent, whereas a median of 34,3 percent was dedicated to marketing and administrative costs.
According to the SA Health Review, huge profits made by the pharmaceutical industry were another reason to question the need for high drug costs.
For the past 10 years, the pharmaceutical industry had been the most profitable in America, with median profit rates more than triple those of other leading companies.
Chief executive officers of the top 10 firms averaged about R80-million each in salaries in 1999, with stock options averaging another R80-million each.
“Drugs prices are therefore considered to a large extent to be managed by their manufacturers, rather than by the market, said the SA Health Review.
“They have less to do with the manufacturing and development costs of the particular product, and more to do with the characteristics of the market in which they are placed.”
In another recent development, the United States has complained to the World Trade Organisation that Brazil’s “local working” requirement in its patent law is in violation of the Agreement on Trade-related Aspects of Intellectual Property Rights, better known as TRIPS.
The US argues that the local working requirement gives the Brazilian government the power to issue compulsory licenses, or import either the patented product or the product obtained from the patented process, when companies fail to work their patents locally.
The local working requirement thus applies when drug companies import patented drugs rather than produce them locally, but only if the companies fails to show that it is not economically or legally viable to produce
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