Hearings Begin Monday for Drug Industry Lawsuit Against South Africa's Generic Drug Import Act
[Mar 02, 2001]

      A lawsuit brought by 40 pharmaceutical companies against the South African government over a law that would allow the country to acquire cheaper AIDS drugs will be heard beginning Monday in a Pretoria courthouse, the Wall Street Journal reports. The law, called the Medicines and Related Substances Act, was passed in 1997, and would enable South Africa to obtain AIDS drugs at reduced prices through two practices: parallel importing and compulsory licensing. Parallel importing involves the purchasing of drugs from the "cheapest sources available" without the manufacturer's permission. Compulsory licensing allows the government, after declaring a national health emergency, to license local companies to manufacture cheaper, generic version of drugs whose patents are held by multinational companies. Drug companies fear that if the South Africa law is allowed to stand, other countries "will be emboldened to pursue similar legislation," threatening their patents. Mark Groomsbridge, a research fellow at the Cato Institute, said, "It is quite likely to be a slippery slope. If the question is AIDS today, why not heart disease and cancer drugs tomorrow?" In addition, the industry is concerned that American consumers will begin to demand cheaper drugs in the wake of South Africa's law. But the South African government said it will "vigorously defend" the law, which hasn't been implemented yet due to the lawsuit. Joanne Collinge, a spokesperson for the South African health ministry, said that the law "reflects the government's position that equal access to health care is a constitutionally protected right." She added, "We have a constitution that says there will be accessible health care, and that means affordable medicines. The problems in getting universal access are so deep we need major structural intervention."

History of the Case
The consortium of 40 drug firms, led by the Pharmaceutical Manufacturers' Association of South Africa, initially filed suit against South Africa's government in February 1998, soon after the law was passed. The industry claimed that the law was "unconstitutional because it gives sweeping power to South Africa's health minister to ignore the patent laws." The manufacturers' association also argued that the law could have "negative economic consequences" for South Africa. Association CEO Mirryena Deeb warned, "If we were to drop the case, the multinational pharmaceutical industry would exit South Africa, and South Africa would be the poorer for it." Drug companies also argued that the AIDS epidemic is a "global problem" that can't be solved with cheap drugs alone, saying that drug companies are just an "easy target for activists, for whom marshalling a worldwide crusade against poverty and disease would be a much tougher task." Meanwhile, several members of a U.S. drug industry lobbying group in early 1998 asked the U.S. trade office to "take action" against South Africa, framing the issue as "simply .. a fight over intellectual property rights, and didn't even mention how it might affect the treatment of AIDS," the Journal reports. U.S. trade officials concurred that in their interactions with South African counterparts over the matter, the subject of AIDS rarely arose, "perhaps because of the societal stigma." According to U.S. officials, the two sides "simply argued about whether the Medicines Act ran afoul of common international trade practices." Charlene Barshefsky, the U.S. trade representative at the time, said, "I didn't appreciate at all the extent to which our interpretation of South Africa's international property obligations were draconian." Later in 1998, the U.S. heightened the pressure on South Africa to amend the law by denying Pretoria's request for "additional benefits" under the Generalized System of Preferences, a "trade scheme that allows poor countries to export products at reduced duties." In April 1999, the U.S. trade office cited South Africa on its Watch List, saying that the Medicines Act could potentially "abrogate patent rights."

Activists Bring Winds of Change
In June 1999, activists began to protest at former Vice President Al Gore's presidential campaign events, "pestering" him at campaign stops around the country. Gore finally announced in July that the White House was reversing its policy on South Africa's law, saying the trade office would adopt a "Don't ask, don't tell stance" and "look the other way" when South Africa began to manufacture or import generic AIDS drugs. The U.S. trade office also began to change its tune toward the pharmaceutical industry and became increasingly "skeptical" of its arguments. U.S. trade officials in December 1999 announced at the Seattle World Trade Organization meeting that they would extend the new South Africa policy to "all poor countries." And despite drug firms' hopes that President Bush would side with the industry, his administration announced last week that it would uphold the Clinton administration's South Africa policy (Cooper/Zimmerman/McGinle, Wall Street Journal, 3/2).

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