E-drug: Drug firms lose first battle in long and costly war
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[Copied from Ip-Health with thanks. KM]
http://biz.yahoo.com/rf/010419/l19303587_3.html
ANALYSIS-Drug firms lose first battle in long and costly war
By Janet McBride
LONDON, April 19 (Reuters) - The world's top drugmakers may have lost
face by dropping a challenge to South Africa over imports of cheap AIDS
drugs, but they stand to lose a lot more if the climbdown opens the
floodgates to cut-price medicines.
When the drugs industry, which rakes in $300 billion a year, abandoned
its court case against the Pretoria government on Thursday, it also
weakened its grip on the patents that feed its bulging profits.
``Intellectual property has been compromised. The drugs companies want
to present this as an isolated case, but like foot-and-mouth disease it
is popping up all over,'' said Barrie James of Pharma Strategy Consulting.
The case against South Africa to block imports of copycat, generic drugs
was the first in a series of looming court actions. With others slated
in Brazil, India the Dominican Republic and Thailand, the South Africa
case could prove an expensive precedent.
``This is a very dangerous situation for the industry to be in,'' James
said.
According to Neil Turner, editor of Pharma Pricing and Reimbursement,
drugmakers were already cutting the prices of AIDS drugs in Brazil,
setting the stage for another climbdown.
Under the deal between South Africa and 39 leading drugs firms, the
drugmakers acknowledged the government's right to enact laws to broaden
access to medicines for the estimated 4.7 million South Africans who are
living with the AIDS virus.
In return, South Africa agreed to consult the firms, including major
manufacturers of AIDS medicines GlaxoSmithKline (quote from Yahoo! UK &
Ireland: GSK.L), Merck & Co (NYSE:MRK - news), Bristol-Myers Squibb
(NYSE:BMY - news), Roche and Boehringer Ingelheim, about implementing
the laws.
And it reaffirmed its commitment to drug patent law as embodied in the
World Trade Organisation's Agreement on Trade Related Intellectual
Property Rights, or Trips.
Industry experts were in no doubt that South Africa had won the legal
and moral argument, despite assertions by the world's biggest AIDS drug
supplier GlaxoSmithKline that both sides had achieved their goals.
Even before Thursday's settlement, Glaxo, Merck and Bristol-Myers had
been scrambling to undercut one another's prices in Africa, experts
noted.
``South Africa will be held up and used in other markets,'' Turner said.
``What the industry has done in the end is to make the modifications to
pricing policy that the campaigners were demanding.''
UNITED STATES, EUROPE A FUTURE BATTLEGROUND?
The drugmakers' opposition to South African plans to import cheap,
generic drugs were not driven by fear of losing sales in Africa -- it
accounts for less than five percent of turnover -- but by concerns that
cut-price medicines would find their way back to the key markets of
North America, Europe and Japan.
``Those fears are very definitely justified,'' Turner said.
The world's biggest drugs market, the United States, has a serious AIDS
problems of its own. Pharma Strategy's James predicted it was only a
matter of time before U.S. AIDS patients began questioning the price
they were paying for treatment.
``This settlement could have a tremendous impact on the industry. The
world market for AIDS drugs is worth around $4.0 billion. If you add
associated infections, you are talking in the region of $8-10 billion,''
he said.
The industry's best hope was to find an efficient way of policing the
distribution of deeply discounted drugs, analysts said, adding this
would be no easy feat.
``They need to batten down the hatches and hope to keep out the water.
The vessel has been holed, and the question is will the hole get any
bigger?'' said James