Court battle resumes Wed

2001-04-16 18:47

London – The world's pharmaceutical industry is in the dock, charged with putting profits before lives by obstructing the supply of cheap life-saving Aids drugs.

A group of 39 companies will resume their court fight on Wednesday in Pretoria against legislation that would allow the South African government to access cut-price copy-cat versions of patented medicines.

The hugely profitable drugs business is convinced international law is on its side -- but the David-and-Goliath battle is proving a public relations disaster.

The companies lining up behind the Pharmaceutical Manufacturers Association of South Africa together have a market capitalisation in excess of $1.3 trillion, some 10 times the gross domestic product of South Africa.

Yet the industry is on the defensive, fearful of a public mauling that could undermine confidence in the patent system which is its lifeblood.

Pressure is mounting for firms to give way. The European Parliament last month called for the court case to be dropped and others -- including the United Nations, the World Health Organisation and the International Red Cross -- are demanding firms do more to improve access to medicines.

Company executives privately admit the vilification of the industry could spiral out of control if more governments -- particularly those in rich countries -- start to question their rights to drug patents.

The industry argues the global system of 20-year patents on new drugs is essential to ensure investment is made in the costly hunt for new treatments.

Critics say it has become a obstacle to treating patients in poor countries who cannot afford Western prices.

A no-win position

Margo James, chief executive of healthcare public relations firm Shire Hall in London, believes the industry is in a no-win position.

"We are a seeing very profitable and successful Western companies taking legal action against the government of a poor country in Africa, and that's a terrible situation for the industry to be in," she said.

Yet the industry is stubbornly pushing ahead with the court case.

Britain's GlaxoSmithKline, the world's largest supplier of HIV/Aids drugs, says firms have no choice but to oppose South African legislation passed by former President Nelson Mandela, which gives the government total power to dismiss patents.

"It challenges the whole principle of patent protection in the developing world," said Vicki Ehrich, the group's head of external relations for HIV/Aids.

"Once you start saying there are parts of the world that should not have patent protection, you undermine the very system which was set up to make it possible to research new drugs."

Companies are specifically worried that low-priced drugs from the developing world may "leak" back into rich countries, undercutting high prices there.

In practice, the risk is limited, according to Steve Plag, pharmaceuticals analyst at Credit Suisse First Boston.

"The financial threat of parallel exports from Africa is very modest because it would be relatively easy to make sure any material you sold there was of a different formulation, for example by changing dyestuffs," he said.

"But obviously the industry feels passionately about protecting intellectual property which is the cornerstone of investment in research."

Differential pricing

Companies says they accept the case for differential pricing, under which poor countries are charged less, so long as the boundaries are clear.

"The industry needs assurances that preferential prices agreed for the developing world will not be used to benchmark prices in the developed world," said Ehrich.

Drug prices are already under scrutiny in the United States and the industry is anxious to ensure that concessions in poor countries are not translated into price cuts in core Western markets.

Differential pricing has already been achieved for products such as vaccines and condoms.

Expanding the system to life-saving medicines for Aids, malaria and tuberculosis is now a top priority for the World Health Organisation and the World Trade Organisation, which jointly chaired a workshop on the subject in Norway last week.

But even when drug prices fall, there is no guarantee that medicines will reach those in need.

Costs of anti-retroviral Aids drugs may be coming down to under $500 per patient per year as firms scramble to offer special deals but this is still beyond the reach of many African governments.

- Reuters