E-DRUG: Explanation of the SA Medicines Act and the Implications
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[this informative memo explains in lay terms what the South African
Medicines Act was to achieve. See www.tac.org.za for more. NN]
Treatment Action Campaign Statement on the Court Case
24 April 2001
An Explanation of the Medicines Act and the Implications of the Court Victory
The court case victory against the Pharmaceutical Manufacturers Association
(PMA) is a critical step towards establishing a legal framework for ensuring
that medicines in South Africa are affordable.
It also represented an important victory of activists, poor people and
people with HIV/AIDS over corporate abuse of power. This was only possible
because of a superbly organised global effort and the dedication of
thousands of volunteers. TAC thanks all our allies and supporters for their
contributions.
There have been a number of misconceptions circulating regarding the
practical implications of the Medicines and Related Substances Control
Amendment Act No 90 of 1997 (Medicines Act). This statement aims to clear up
these misconceptions. Some commentators have stated that the new law allows
the South African government to immediately proceed with the importation and
production of generic versions of essential medicines. On the other hand,
others have implied that the law will have no effect on access to medicine.
Both opinions are wrong.
What Does the Medicines Act Do?
The Medicines Act introduces three important measures, (1) generic
substitution of off-patent medicines and medicines imported and produced
under compulsory licenses, (2) parallel importation of patented medicines
and (3) a transparent medicine pricing system through the establishment of a
pricing committee.
Generic Substitution
The generic substitution measure compels pharmacists to prescribe a cheaper
generic version of a medicine, if one exists, when presented with a
prescription from a patient. For example, suppose a doctor prescribes
Bactrim (approximately R95 for a pack of 20), the formerly patented
brand-name of an essential medicine with the scientific name of
cotrimoxozole, to a patient, who then goes to a pharmacy to obtain the
medicine. The pharmacist will be obliged to prescribe a cheaper generic
version, such as Purbac (approximately R16 for a pack of 20). If a doctor
writes the words "No Substitution" on the prescription, then the pharmacist
does not have to substitute a brand-name drug with a generic.
Although some ethical pharmacists already practice generic substitution,
many do not, especially when dealing with a population that is generally
unaware of price differences between generic and brand-name drugs.
Generic substitution does not apply to medicines under patent, unless a
compulsory license has been granted for a generic. The Patent Act, a law
which is undisputed and TRIPs compliant, contains provisions for obtaining
compulsory licenses and it is this legislation, not the Medicines Act, which
will have to be used in order to ensure substantial, sustainable price
reductions of anti-retrovirals and other essential medicines under patent.
Parallel Importation
The parallel importation measure has perhaps been the source of most of the
confusion surrounding the Medicines Act. Parallel importation refers to the
purchasing of patented medicines from foreign countries. It is based on the
principal that once a product is sold, the seller loses all ownership rights
over it. Parallel importation does not refer to purchasing generic versions
of patented drugs; a compulsory license is required to do that.
An example of a medicine that the government and private sector pharmacists
would benefit from importing in parallel is Ciprobay, Bayer's patented
brand-name version of ciprofloxacin, an essential antibiotic. The South
African government purchases one 250mg capsule for R2.93. However, in India
retail pharmacists usually sell this medicine for R0.65 per capsule. The
reason for this price differential is that Ciprobay has to compete against
generic equivalents in India.
Pricing Committee and International Tendering System
Another element of the Medicines Act is the introduction of a pricing
committee that will set up transparent pricing mechanisms.
Pharmaceutical companies will have to justify the prices they charge. The
pricing committee can recommend that the Health Minister make regulations on
the introduction of a transparent pricing system for all medicines. Drug
companies will be allowed to set a single exit price for any medicine,
meaning that pharmacies will not be allowed to charge an amount higher than
the exit price. Instead, the Pricing Committee will recommend a dispensing
fee that pharmacists can charge instead of a markup.
Benefits of the New Measures
Generic substitution will ease pressure on medical aid costs and reduce the
prices of medicines in the private sector. This will render the private
sector accessible to more people and ease the disproportionate pressure on
the public health-care system.
Parallel importation will reduce the prices of some patented medicines in
both the public and private sectors. Although these reductions will not, in
general, be sufficient, they will free up resources in the public sector and
allow more people access to the private sector.
At a minimum The pricing committee should force pharmaceutical companies to
justify the prices they charge. It will also reduce over-charging by
pharmacists in the private sector.
Future Pharmaceutical Industry Issues
There will probably be many more legal disputes with the pharmaceutical
industry over the next few years. TAC, and hopefully the government and
generic manufacturers, will work toward obtaining compulsory licenses for
essential patented medicines. Either the multinationals will have learnt
from the public embarrassment they experienced over the last few weeks and
they will grant voluntary licenses thereby avoiding litigation, or they will
continue to contribute to delaying access to medicine, at the expense of
their reputations.
A common misconception regarding compulsory licenses is that they do not
result in profits for the patent-holders. Compulsory licenses are usually
accompanied by royalty payments on sales by generic manufacturers. While
multinational pharmaceutical companies will experience substantially reduced
profits from compulsory licenses, they will still receive income from
generic sales.
The pharmaceutical companies must act in good faith and not hamper the
implementation of the Medicines Act. They have asked for representation in
issuing the pricing committee regulations, which is fair enough, but civil
society, particularly TAC, health-care workers, labour and government must
be represented and have greater influence.
Also, companies that have publicly announced price reductions must implement
them immediately. Bristol-Myers Squibb (BMS) stated that the combined daily
price of anti-retrovirals ddI and d4T would be reduced to US1$ per day and
that their patents on these medicines would not be enforced in sub-Saharan
Africa. They have made this offer in bad faith, because it has not been
extended to the private sector, the only significant supplier of triple-drug
anti-retroviral therapy in sub-Saharan Africa. In particular, they have
spurned a request by a private company, AID for AIDS, to receive ddI and d4T
at the new price. The court case, in particular an affidavit by James Love
of the Consumer Project on Technology, has exposed BMS as arguably the
world's worst patent abuser. This is a company that specialises in turning
publicly funded research into private profit. TAC will increase the pressure
against BMS over the next few months to drop its prices and to unequivocally
relinquish its publicly funded patents, without compensation.
Government's Responsibilities
But it is the South African Government that now bears the primary
responsibility for fighting the HIV epidemic in this country. There work is
cut out for them.
They must:
* Enact the Medicines Act immediately
* Begin realising the implementation of a country-wide mother-to-child
transmission programme without further unnecessary delays
* Apply for voluntary licenses on essential generic medicines immediately
* Invest more money into AIDS prevention programmes and include treatment as
part of the prevention message
* Develop a treatment plan by June 16, which will outline how treatment will
be made accessible to all South Africans with HIV/AIDS, and will commit the
government to increased health-care spending
An important lesson from the court case has been that global solidarity on
social issues is immensely powerful. The South African government would not
have won the court case so easily and quickly without global mobilisation.
Issues that are of concern to all poor countries must be combated with a
united front. Therefore the South African government must issue a statement
of support for Brazil in its WTO dispute with the United States.
The South African government and TAC have had a mixed relationship over the
last few months. This has been a result of government's, generally, poor
handling of the epidemic. TAC will be government's firmest supporter when it
does the right thing, such as introducing the Medicines Act, but we will be
its sternest critic when it fails to meet its constitutional duties to
protect life and dignity.
Particularly concerning are the continual delays in implementing a
country-wide mother-to-child transmission prevention programme and the lack
of a treatment plan.
TAC's objectives are to get treatment for people with HIV/AIDS and to build
a quality health-care service. We will use all means at our disposal to
achieve these aims.