Drug companies take on the government

A much-anticipated court battle between the South African government and the Pharmaceutical Manufacturers' Association (PMA) began in the Pretoria High Court on Monday. At stake - South Africa's ability to import cheaper copies of drugs which are developed, sold and patented by multinational drug companies which monopolise the world market.

The legal challenge, led by the PMA, stems from the Medicines and Related Substances Control Amendment Act of 1997, which gives the South Africans the leeway to, among other things, parallel import drugs from sources cheaper than the patent holders.

The PMA, which in 1998 was granted an interdict preventing the government from implementing the law, has argued that aspects of the Act contravene international patent laws and South Africa's own constitution. The PMA has also claimed that the law is not consistent with the Trade Related Intellectual Property Rights (TRIPS) agreement, which is binding on all World Trade Organisation (WTO) members. However, there are other aspects of the Act to which they object: for example the creation of a committee to monitor drug prices, the curtailing of doctors' powers to sell drugs and the mandatory offering of generic drugs to patients at pharmacies. The association has argued that such circumstances would affect its profits, and as a result, much needed research and development of new drugs.

The South African government rejects these claims. It has said repeatedly that it believes the Act to be constitutional and consistent with TRIPS - which grants countries permission to parallel import cheaper drugs and to implement compulsory licensing (that is, granting a local manufacturer a licence to produce copies of a drug) in certain circumstances.

South Africa's chief director for trade negotiations, Tshediso Matola, told IRIN that the case is about much more than patent rights. "What is at stake for South Africa is the ability of government to intervene in addressing the huge challenges in the area of health that we inherited from apartheid. As far as the protection of intellectual property rights are concerned, we have never sought to undermine it," he said.

South Africa's huge health challenges - AIDS, TB and malaria being just some of them - are shared by scores of other developing countries which are watching the case with interest. Much of the PMA's anxiety is based on the fact that these countries could follow suit if South Africa is allowed to parallel import cheaper drugs.

"If the South African government wins this case it will provide a strong basis, perhaps much clearer than that which exists, about what government can do in addressing the crisis. Many of the developing and other countries support this challenge in principle because they have the same challenges. They will be looking at the same way of doing it," Matola said.

Andy Gray, a site facilitator at the Health Systems Trust, which is a research body based at the University of Natal, told IRIN that while the price of AIDS drugs has been highlighted during the "parallel importing" debate over the past two years, the outcome off the case will impact on the importation a wide array of drugs needed to combat various diseases.

"This is all about market failure. When market forces are allowed to determine the prices of drugs, two things happen: drugs become unaffordable for the poor - countries or individuals - and drugs which are only needed in developing countries won't be made because they won't be profitable. So how does a government intervene in a system where the market has failed the patient?" Gray asked.

He said the TRIPS agreement does not make is easy for poor countries to obtain cheaper drugs. While some countries can parallel import, many can not invoke the compulsory licensing clause of the agreement because they do not have the resources or infrastructure to manufacture drugs locally, he added. According to one South African AIDS activist, WTO rules make it so complicated to invoke compulsory licensing or parallel importing that they can only be rarely used anyway.