Drug Companies Withdraw AIDS Drug Lawsuit Against South Africa
The Pharmaceutical Manufacturers Association of South Africa and 39 pharmaceutical companies today agreed to drop their lawsuit against the South African government over a law that would allow the country to import and manufacture cheaper generic AIDS drugs, the South African Broadcasting Corporation reports (South African Broadcasting Corporation, 4/19). BBC News reports that AIDS activists cheered when the announcement was made after a hearing that "lasted less than a minute" (BBC News, 4/19). In an "unconditional surrender," the drug companies agreed to accept "virtually all of the legislation," but are urging the government to rewrite a "key section" of the law "to clarify and limit the circumstances in which it can grant compulsory licenses for third parties to manufacture patented medicines at a lower price." Britain's Guardian reports that South Africa has not indicated whether it will "give ground" on this issue, but the government has already said that its "primary interest" is not manufacturing copies of patented drugs, but importing and manufacturing generic drugs (McGreal, Guardian, 4/19). Under the agreement, South Africa "promise[d]" that the implementation of its 1997 Medicines and Related Substances Control Act would comply with the rules of the World Trade Organization. The Wall Street Journal notes that this was a "promise the government has agreed to make for years, but the industry had long insisted wasn't enough" (Block/Harris, Wall Street Journal, 4/19). The drug companies also agreed to pay costs incurred by the South African government related to the lawsuit (South African Broadcasting Corporation, 4/19).
Avoiding a PR 'Disaster'
With today's withdrawal of the suit, the pharmaceutical companies "will stave off another public relations disaster," the Guardian reports. The industry has faced a "groundswell of public and government opposition," which caused some of the "largest firms" involved in the case to "rethink their strategy." In addition, if the case continued, the companies faced having to reveal "some of their most closely guarded business secrets," such as pricing policies, profit levels and the source of funding for AIDS drug research (Guardian, 4/19). NPR's Brenda Wilson reports on "Morning Edition" that the "industry realized that this was a losing proposition. [South Africa] is a very small market ... less than 2% of their [total AIDS drug] market. ... I think they saw that even if they won the case, their image would suffer in the long term" (Wilson, "Morning Edition," NPR, 4/19). The Guardian reports that a "split" had developed between the Pharmaceutical Manufacturers' Association and some of the larger firms in the case, who now say that the case "should never have been pursued" and were "disturbed at the content of some submissions by PMA lawyers." For example, the trade group had argued that "unless there were financial returns there was little incentive for drug companies to develop new AIDS treatments" (Guardian, 4/19). In an effort to stave off increasing damage to their "collective image," five companies that manufacture AIDS drugs -- Merck & Co., GlaxoSmithKline, Bristol-Myers Squibb, Boehringer Ingelhiem and Roche -- "pushed hard for a settlement." The remaining companies "reluctantly agreed to go along" (Wall Street Journal, 4/19). The Guardian notes that the drug industry "has ultimately achieved the very thing it tried to prevent -- encouraging governments across the developing world to use the law to obtain more affordable drugs" (Guardian, 4/19). The case "will go down in history ... as one of the great corporate PR disasters of all time," and the "hard lesson that the big pharmaceutical companies have been taught ... is that there can be no global marketplace without a world sense of right and wrong" (Denny/Meek, Guardian, 4/19).
South African officials indicated that they were ready to implement the law "within weeks" once the legal challenge was dropped (Guardian, 4/19). PMA CEO Mirryena Deeb said that the South African government had agreed to consult the drug firms when drafting regulations to implement the law. BBC News noted that the "pressure will now be on the government to come up with a treatment plan for the 4.7 million people estimated to be HIV-positive" in South Africa (BBC News, 4/19). During settlement negotiations, the industry originally promised to help "run partnerships on AIDS programs." But South African President Thabo Mbeki faxed back a change in the settlement draft -- crossing out "AIDS" and replacing it with "communicable diseases." This move "chilled" some in the industry as a reminder of Mbeki's "oft-cited belief that AIDS is simply a disease of poverty, not of infection with [HIV]." However, South Africa's drug regulatory body, the Medicines Control Council, yesterday signaled their commitment to curbing the AIDS epidemic by finally approving nevirapine, a drug that reduces the risk of vertical HIV transmission, after a seven-month delay. But a "longstanding" pilot project to give the drug to 90,000 expectant mothers across the country still awaits cabinet approval. The cabinet is "reportedly concerned about what it calls the long term cost implications" of the program. In July last year, Boehringer offered to donate the drug to South Africa free of charge for a period of five years, but it "is still not certain" that the government will accept the offer (Wall Street Journal, 4/19).
Implications for Brazil
As the South African case draws to a close, attention now shifts to the suit being brought by the U.S. government and the Pharmaceutical Research and Manufacturers Association of America against Brazil. The plaintiffs argue that Brazil, which manufactures cheap copies of patented AIDS drugs, is "flouting" the Trade Related Aspects of Intellectual Property Rights agreement. The Guardian notes that Brazil differs from South Africa in that the country is "much richer" and is a "genuine potential market" for AIDS drugs. But the country's supporters say Brazil is a "successful example of how a relatively poor country can treat AIDS if it has access to cheaper generic drugs," as the number of AIDS deaths in the country have halved since the government began offering reduced-cost treatment. In light of the South Africa case, the Guardian notes that Merck and Pfizer, which are leading the campaign against Brazil's generics industry, "must be reevaluating their strategy. But it will be harder for big drug companies to admit defeat on this one" (Guardian, 4/19).
The trial in South Africa has prompted several news reports in the United States and abroad. To listen to a report on the trial aired yesterday on NPR's "All Things Considered," enter http://www.npr.org/ramfiles/atc/20010418.atc.17.ram into your Web browser. NPR's Brenda Wilson reports on the withdrawal of the lawsuit on this morning's "Morning Edition." To listen to the report, which will be posted three hours after the last show on the West Coast, go to http://search.npr.org/cf/cmn/cmnpd01fm.cfm?PrgDate=04/19/2001&PrgID=3. In addition, the South African Broadcasting Corporation features a television news clip on the trial. To view this clip, go to http://www.sabcnews.co.za/SABCnews/video_ram/0,1573,3719,00.ram. Note: You must have RealPlayer to listen to these clips.