Led by the Pharmaceutical Manufacturers? Association (PMA) of SA, a trade association representing the research-based pharmaceutical industry, legal action was instituted against Government in February 1998 to defend the industry?s patent rights.

Action on the part of industry is specifically aimed at Section 15C of the Medicines and Related Substances Control Amendment Act (No 90 of 1997), which according to the PMA allows for the “abrogation of all patent rights for any pharmaceutical upon ministerial discretion”.

Section 15C allows government to buy drugs from countries where prices are already lower, and so trading in parallel with the local seller of the same drugs.

The PMA said that the health department had argued in 1997 and 1998 that Section 15C was intended purely to enable government to occasionally parallel import a product they believed might be overpriced in South Africa.

PMA CEO Mirryena Deeb said government has since announced that Section 15C was “model legislation designed to allow for compulsory licensing and parallel trade”.

According to the SA Health Review industry?s global pharmaceutical sales in 2002 are expected to be U$406-billion with sales predominantly in the industrialised regions (46,7% in North America, 24,8% in Europe and 11,3% in Japan).

Despite their disease burden, all countries in sub-Saharan Africa are expected to account for only 1,3% of sales and the Indian sub-continent 1,8%.

The sale of drugs in South Africa earned pharmaceutical companies about R8,25-billion last year, but the public sector only accounted for 24 percent of sales despite the fact that over 80 percent of the population depends on state health.

This translates into R59.36 being spent on every person using the public health system last year, as opposed to a staggering R800.29 per person in private health, according to Andy Gray and Thulani Matsebula writing in the latest SA Health Review.

Director General for Health, Dr Ayanda Ntsaluba said it is because this law is so fundamental to transforming South Africa?s highly inequitable health care system to benefit even the poorest sections of society that “we will defend this costly action to the fullest extent”.

Zackie Achmat of the Treatment Campaign confirmed that his organisation would apply today to join the case as a friend of the court. “We would support any one who does research and discovers any new product for their labour to be rewarded and properly rewarded. However, we believe that the patents system as it stands is undermining the right of access to medicines. We?re prepared to use the existing patent system, but we would like to see an international body re-examine it and put health care above patent law. We need to find a way that people get rewarded for their efforts, but at the same time that there?s no obstacle to making medicines more affordable. Not just for HIV and AIDS, but for everyone.”

When questioned on the high prices of their drugs, pharmaceutical companies site high research and development costs to be responsible for the high costs of innovator drugs.

But analysis of the top 12 drug manufacturers in America in 1999 showed that their median percentage of revenue dedicated to research and development was 12,4%, whereas a median of 34,3% was dedicated to marketing and administrative costs.

The Health Review said that the high profits made by the pharmaceutical industry was another reason to question the necessity for high drug costs.

For the past 10 years the pharmaceutical industry has been the most profitable in America, with median profit rates more than treble those of other leading companies.

Chief executive officers of the top 10 firms averaged U$10-million each in salaries in 1999, with stock options averaging another U$10-million each.

“Drugs? prices are therefore considered to a large extent to be managed by their manufacturers, rather than by the market. They have less to do with the manufacturing and development costs of the particular product, and more to do with the characteristics of the market in which they are placed,” according the health review.

In another recent development the United States has complained to the World Trade Organisation (WTO) that Brazil’s “local working” requirement in its patent law is in violation of the Agreement on Trade-related Aspects of Intellectual Property Rights, better known as TRIPS.

The US argues that the local working requirement gives the Brazilian government the power to issue compulsory licenses or import either the patented product or the product obtained from the patented process when companies fail to work their patents locally.

The local working requirement thus applies when drug companies import patented drugs rather than produce them locally, but only if the companies cannot show that it is economically or legally unviable to produce locally.