Select Committee on International Development Written Evidence


Memorandum submitted by Action for Southern Africa (ACTSA)


  Action for Southern Africa (ACTSA), the successor to the Anti-Apartheid Movement, campaigns to support peace, democracy and development. It is supported by thousands of individuals, national and local trade unions, churches and other NGOs. It is the current Chair of the European Network for Information and Action on Southern Africa. While HIV/AIDS is a significant threat across the developing world, Southern Africa is at the very epicentre of the disease, where over a third of the world's people with HIV/AIDS live. As this note will show, South Africa itself is also currently a key focus in the wider issue of patents and access to drug treatments. ACTSA has worked with other development and HIV/AIDS groups in Britain in developing its campaign and with government and NGO bodies in Southern Africa, including the Treatment Action Campaign (TAC) in South Africa.


  The high price of effective patented drugs to treat HIV/AIDS-related illnesses is increasingly being acknowledged as a major obstacle to effective strategies to tackle the spread and impact of the disease in developing countries.

  In developed countries such drugs have radically reduced the level of AIDS mortality—allowing people to live longer, continue to contribute to their society and so not occupy expensive hospital beds. But they are beyond the means of most people and governments in a region like Southern Africa. In the face of the apparently insurmountable cost barriers, many policy makers have argued that the only current option for such countries remains prevention and basic palliative care.

  There is a growing realisation of the brutal political morality inherent in such an approach—amounting to writing off even attempting to bring life-saving treatments now routine in developed countries to the 24 million HIV-infected people in Africa alone. But it is also becoming clear that it overlooks the links between access to treatment and the success of prevention programmes, and the huge costs brought by not providing drug treatments.

  Mechanisms exist to achieve large, systematic and sustainable reductions in the prices of HIV/AIDS drugs, without recourse to unfeasibly large injections of aid to subsidise drug purchases. The question is whether the political will can be mobilised to curb the drive by the large pharmaceutical companies, with support of developed country governments, to exclude from developing country markets price-reducing competition by producers of generic drugs.


  Improving access to medicines is vital to help prevent the spread of the disease and to prove to people that there can be life with HIV/AIDS. If treatment is not available, being diagnosed HIV-positive is little short of a death sentence. People do not get tested, preferring not to know their status. There is growing evidence from developing countries that access to treatment would encourage people to come forward to be tested and help reduce the stigma of the disease—both key elements of the success of prevention and education.


  Furthermore, the cost of extending access to drugs to people with HIV/AIDS, must be weighed against the major costs of not doing so. Primary health and hospital services in Southern Africa are struggling under the weight of providing even basic care to the huge numbers of people with HIV/AIDS and related infections who are sick and dying because they do not have access to drug treatments. There is also the cost of tackling the growth of diseases like TB in the non-HIV positive population spreading from those with HIV/AIDS. Further weighed in the balance must be the cost for the economy as a whole of a workforce that is getting ill and is dying earlier because of lack of access to treatment.

  Access to cheaper drugs is not an answer in isolation from other fronts in the war against the epidemic in developing countries—prevention, upgrading the resourcing and efficiency of health delivery systems, palliative care and the development of a vaccine are all crucial. But, as a key part of an integrated strategy, the role of increasing access to affordable drugs can no longer be ignored.


  Many key medicines to treat HIV/AIDS and opportunistic infections are simply too expensive for people and governments in many parts of the developing world such as Southern Africa. A key reason why prices are so high for many of these relatively new medicines is that the drug patent system provides the large pharmaceutical companies with exclusive control over their sale while the patent is in force. As international pressure for developing countries to accept and implement protection of patented drugs produced in developed countries has grown, companies in developing countries have increasingly been prevented from producing or importing cheaper generic versions of drugs. With a lack of competition in the marketplace, prices are high for the branded drugs.

  By contrast, in some developing countries, such as Thailand, India and Brazil, generic versions of anti-retroviral drugs and medicines for the treatment of opportunistic infections, with proven quality, have been produced at substantially lower prices. In Brazil they have been the basis of a national programme of universal access to antiretroviral therapy launched in 1996 that has been credited with cutting AIDS deaths in a city like São Paulo by 53 per cent.

  For example, fluconazole is a drug used to treat meningitis and thrush infections in people with HIV/AIDS, patented by the US company Pfizer. One 200 mg tablet costs US$4.10 in the public sector in South Africa (and over US$13 across the counter in a private chemist). A generic version can be bought for 30 cents in Thailand. Glaxo-Wellcome's AZT, an important antiretroviral drug costs US$20 in South Africa, its Thai equivalent just 30 cents.


  Pharmaceutical companies defend strict protection of patents by arguing that high prices reflect high investment made in research and development of the new product. "Any threat to intellectual property rights will undermine the future flow of innovative medicines", argued the UK pharmaceutical industry memorandum to the Select Committee's previous inquiry on After Seattle. ACTSA recognises the need to provide for patent protection to stimulate and reward research and development of new medicines, but it also argues that a balance must be struck with protecting the rights of poor people to gain access to life-saving treatment. In an economically-divided world, blanket application of such patents effectively means key HIV/AIDS drugs will be largely unavailable in poor countries.

  It should be noted, too, that there have been challenges to the industry's figures on how much research and development costs represent within the prices charged—with one US study indicating that it represented no more than 7.4 per cent of sales income. The amount that publicly-funded research and pre-clinical trials contributes is also often overlooked (leading to disputes between public health bodies and companies seeking to patent drugs including some antiretrovirals such as AZT). Furthermore, according to WHO, drug companies spend only 10 per cent of their investment on diseases that affect 90 per cent of the global population. It is also unlikely that drug companies would lose much profit by allowing African countries access to cheaper drugs because, at current prices, they cannot buy them anyway—only 1.5 per cent of their total sales income comes from sub-Saharan Africa. Indeed, royalties on low-price, but large-volume sales they could receive under compulsory licence schemes (see below) allowing generic production could potentially even bring them more income than on current high-price low-volume sales of their own branded drugs.


  Mechanisms used to achieve lower priced generics, in fact, have a long track record in developed countries. One key method has been compulsory licensing under which a governmental body grants a manufacturer the right to produce and sell a safe, generic version of a drug without the agreement of the patent holder. Usually this is only after the patent holder has been requested—and has refused—to grant a voluntary licence and entails an obligation on the licence-holder to pay a royalty to the patent-holder. And while compulsory licence provisions have existed in many countries' law, relatively few have had to be issued. Usually the capacity for issuing them has been enough to ensure that licences are agreed on reasonable terms between the parties. The issuing of licences also has to be justified on specific grounds, notably countering anti-competitive practices and public health emergencies. The role of this mechanism has been thrust into the limelight anew for developing countries simultaneously trying to tackle the health emergency which HIV/AIDS represents (and for which most key treatments are under patent), while under pressure to implement tight patent protection for drugs.

  Parallel importing is another arrangement under which the purchase of drugs is authorised from a third party in another country, instead of buying them directly from the manufacturer, to take advantage of the fact that pharmaceutical companies charge different prices in different countries; again a practice widely used in EU countries.


  However, the large pharmaceutical companies and the governments of the countries in which they are based have sought to ensure such practices are prevented and their markets are protected—with some success. For example, Canada, which set up a compulsory licence system in 1923 and used it widely for decades—leading to millions of dollars worth of savings on national drugs bills and the growth of a major generic drug industry—had to abrogate it in 1993 when it joined NAFTA.

  A further reflection of this general trend is the Agreement on Trade-Related Aspects of Intellectual Property rights (TRIPs), concluded as part of the Uruguay Round, which requires all WTO members to adapt their national laws to the minimum standards it sets out on recognising and enforcing minimum 20 year patent protection—within an agreed period (2005 for most developing countries, 2006 for the Least Developed). However, its provisions also include safeguards acknowledging the legitimacy of moderating patent protection to ensure competition and protect consumers' interests; especially in the health sector where these may have—literally—life-or death consequences. In particular, Article 31 of TRIPs allows governments to override patents (including by using compulsory licences) on the basis of public interest, national emergency, anti-competitive practices or other grounds defined in national law.

  However, the ability of developing countries to use such measures in practice is very different. Large pharmaceutical companies and developed country governments have either simply resorted to bilateral threats and pressure outside the multilateral WTO system or have put different or vague interpretations on what TRIPs specifies in this area. The objective has been to press developing countries to adopt legislation more restrictive than required by TRIPs in order to protect domestic economic interests.


  The case of South Africa is an important illustration of this reality. In 1997 the South African Parliament passed the Medicines and Related Substances Control Amendment Act, changing its law on patents to allow the use of compulsory licensing and parallel importing as a means to achieve more affordable prices for key drugs, such as those for people with HIV/AIDS. The Government faced an onslaught of action from developed countries which has prevented—to this day—these potentially life-saving measures from being put into practice including:

    —  legal action launched by the Pharmaceutical Manufacturer's Association of South Africa (representing local affiliates of the large international drug companies) in 1998 arguing that the law undermines patent protection and constitutional property rights which has tied it up in the courts and prevented it from being put into practice (though the case is now set to be heard in court in March 2001).

    —  an intense lobbying effort by the US Government at the highest level, with measures including the US Trade Representative putting South Africa on its "Watch List", the withholding of preferential GSP tariff treatment from certain South African exports and threats to block aid (though the US Government sought to modify this overtly aggressive stance in the face of mounting public outcry in the run up to the US elections through a presidential Executive Order).

    —  pressure from both individual EU Member States and the then European Commissioner Leon Brittan who wrote to the Vice President Mbeki in March 1998 warning: "I am concerned that the new law might conflict with the objectives of the Trade and Co-operation Agreement under negotiation between South Africa and the Community. Section 15c of the law in question would appear to be at variance with South Africa's obligations under the WTO Agreement on TRIPs and its implementation would negatively affect the interests of the European pharmaceutical industry".

  In parallel to this concerted pressure, has been more high-profile announcements by the large pharmaceutical companies to offer drugs at reduced prices or even free of charge in Africa. (For example, Pfizer's December 2000 offer to provide Fluconazole free of charge in South Africa. The drug has been at the centre of a high-profile campaign by the Treatment Action Campaign illegally to import a generic version from Thailand in order to highlight "unjust patent laws"—and, in a significant move, was granted a temporary licence for use in treating HIV/AIDS patients by the South African Medicines Control Council).

  A number of the major headline-grabbing announcements by the companies for such deals in Africa remain as yet unfulfilled. In part this is because, on closer inspection, the offers are problematic—they can be very time-consuming to negotiate country-by-country and drug-by-drug, are normally set for a limited period, cover only the public sector and often come with many strings attached. HIV/AIDS drugs need to be taken in precise dosages and if the treatment regimes are interrupted, there is a high risk of generating resistant forms of HIV. As one concerned South African health official also said: "Are we to provide the drug free for a time, only to have to tell people we are having to take it away again?" There are also fears that such case-by-case, voluntary deals will include conditions that countries abrogate their rights to use compulsory licensing or a parallel importing. A more reliable and sustainable basis is needed if drugs are to be available regularly and in the necessary quantities within a national programme of distribution.


  This problem will remain unresolved until there is clear, common interpretation of the TRIPs agreement. Developed countries need to cease bilateral bullying of developing countries seeking to use measures such as compulsory licensing as part of an HIV/AIDS strategy, and instead explicitly support them on development grounds. This is all the more important in a context where developing countries like South Africa seeking to attract foreign investment can suffer from a perception of "irresponsible" trade policy within developed country markets—even if they are fully complying with WTO and TRIPs rules. Important current initiatives within the G8 and the EU, in which Britain is taking a key role, to mobilise international support for other action needed to tackle the scourge of HIV/AIDS—such as the development of a vaccine and support for developing country health systems—are compromised without addressing this issue.


  ACTSA believes that the British Government should build on its strong role on the issue of HIV/AIDS and global communicable diseases by:

  1.  Working to ensure affordable access to drug treatment is given higher priority as an approach to combating HIV/AIDS in developing countries;

  2.  Issuing a clear public statement supporting Southern African countries seeking to use measures such as compulsory licensing to reduce prices for vital drugs for people with HIV/AIDS and related diseases as provided under the safeguards contained within the WTO TRIPs agreement, and taking a lead within the European Union to secure this at an EU level;

  3.  Entering into dialogue with the large pharmaceutical companies to encourage them to revoke their current legal action against the South Africa Government over the 1997 Medicines Act provision to allow compulsory licensing and parallel importing;

  4.  Offering technical and legal assistance to Southern African countries on patent protection legislation to ensure that they make full use of the provisions allowed under TRIPs to introduce competition to ensure the reduction of prices for HIV/AIDS drug treatments.


September 2000

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© Parliamentary copyright 2001
Prepared 29 March 2001