Spotlight on South Africa
South Africa's efforts to reform its intellectual property regime to improve access to medicines have met strong international resistance, reviving an IP imperialism that first undermined the post-apartheid government in the late 1990s.
South Africa has the highest prevalence of HIV/AIDS compared to any other country in the world, with an estimated 6.3 million people living with HIV, and over 2 million children orphaned due to AIDS in 2013 alone. The gravity of the epidemic is symptomatic of the deeper socio-economic crisis facing South Africa, with HIV transmitted along deep social fault lines created by poverty, inequality and social injustice.
When Nelson Mandela took the reins after the first democratic elections in 1994, South Africa’s healthcare system was badly in need of reform. Only 20% of the population, mostly white, was covered by private healthcare while the black majority relied on public sector care. Many South Africans did not have access to healthcare at all, making healthcare reform a significant priority for the post-apartheid regime. In 1996, the National Drug Policy Committee released a revised National Drug Policy designed to lower drug prices, support the local pharmaceutical industry and promote the prescription of generic drugs. The most controversial proposal was an amendment to the South African Medicines and Related Substances Control Act – a new Section 15C which would permit both compulsory licensing and parallel imports of patented drugs.
Fearing a domino effect in the developing world, the US pharmaceutical industry lobbied against the enactment of Section 15C, criticizing it as a complete abrogation of patent rights and a violation of TRIPS. After the amendment was signed into law by President Mandela on 12 December 1997, 39 pharmaceutical companies challenged the constitutionality of the amendments before the High Court of South Africa in February 1998. Meanwhile, the Pharmaceutical Research and Manufacturers of America (PhRMA) lobbied the US government to discuss Section 15C in high-level bilateral trade talks between the US and South Africa. South Africa was placed on the Special 301 Watch List by the US Trade Representative for ‘inadequate’ intellectual property protection, bringing the country close to unilateral trade sanctions. US development assistance was also made conditional upon the repeal, suspension or termination of Section 15C.
US foreign trade policy did not shift until 1999 when AIDS activists publicly criticized Vice President Al Gore for pressuring South Africa to repeal policies designed to save lives. In late 1999, South Africa was taken off the Special 301 Watch List and the lawsuit initiated by foreign pharmaceutical companies was dropped. At the December 1999 WTO Ministerial Conference in Seattle, President Clinton confirmed that the US would adjust its trade policies to enable developing countries like South Africa to gain access to essential medicines.
The events of the late 1990s illuminated the tension between patent protection and public health concerns, triggering debate over the scope of legislative flexibility permitted under TRIPS. To what extent could WTO members enact domestic laws to protect public health while also complying with their international obligations to respect intellectual property rights under TRIPS?
Perhaps the most concerning aspect of the South African controversy was the US’ unsympathetic response to the dire health needs of South Africans, combined with its inability to respect South African legislative sovereignty. Its obdurate attempts to impose its own intellectual property standards on an embryonic regime struggling with rapidly rising HIV numbers cannot be justified. Yet almost two decades later, history seems set to repeat itself. As South Africa perches on the cusp of critical intellectual property reform, pharmaceutical companies in the US are campaigning to prevent life-saving reform once again.
In September 2013, South Africa launched a draft National Policy on Intellectual Property, containing the following recommendations:
- Establish a substantive patent examination system to replace the current regime that results in more patents on medicines than virtually any other country in the world.
- Amend legislation to incorporate patent flexibilities contained within TRIPS, particularly in light of the 2003 Doha Declaration.
- Amend legislation to facilitate pre- and post-grant patent opposition.
- Impose stricter standards of patentability to eliminate evergreening via secondary patents on new uses and new forms of existing medicines.
- Refuse entry into bilateral agreements that may negate the gains attained in TRIPS, and encourage other developing countries to do the same.
- Amend legislation to promote parallel imports and compulsory licensing in line with the Doha Decision.
- Intensify education and awareness among law enforcement agencies to ensure that generic medicines are not seized or confiscated in transit upon the misconception that they are counterfeit goods.
The need for patent law reform in South Africa is threefold. First, due to the absence of a substantive patent examination system, South Africa grants an excessive number of patents in comparison to both developed and developing countries. Unpublished research by academics from Columbia University, Yale University and the Medicines Patent Pool, presented at a 2012 conference, showed that South Africa is granting 40% more pharmaceutical patents than the US and EU on identical applications. Applying for a patent in South Africa is around 20 to 30 times cheaper than most patent offices, and patent applications are not substantively examined to ensure that they meet domestic patentability standards. Excessive patenting keeps prices artificially high and delays the introduction of generic medicines for prohibitively long periods of time. Of the 2,442 pharmaceutical patents granted in South Africa in 2008, only 16 were held by local companies.
Secondly, South Africa’s weak patentability standards expose the country to frivolous and abusive patenting practices. Pharmaceutical companies can make minor modifications to existing drugs in order to obtain multiple patents on single medicines. This process – known as evergreening – extends a company’s period of patent protection beyond 20 years and keeps drug prices artificially high for extended periods of time. To prevent evergreening, South Africa must adopt stricter standards of patentability which exclude new uses, forms and other trivial changes to existing molecules.
Thirdly, South Africa is not taking sufficient advantage of TRIPS flexibilities such as parallel imports and compulsory licensing. To date, it has not issued a single compulsory license on a medicine. South Africa needs to adopt broader grounds and simpler processes for issuing compulsory licences in order to facilitate more affordable access to life-saving drugs.
Brook Baker hopes that the proposed reforms will embolden other developing countries to take similar steps to incorporate TRIPS flexibilities, based on the precedents set by powerful middle-income countries such as South Africa, Brazil and India. He argues that the right to health cannot be fully exercised under the yoke of IP fundamentalism and the continuing threat of extended medical monopolies. Instead, developing countries must claw back their policy space and collaborate in adopting and implementing TRIPS flexibilities. Coordination in the review of patent applications and the use of compulsory licensing for strategic medicines, Baker argues, will promote generic competition in broad markets and facilitate affordable access to life-saving medicines.
Anxious to preserve their monopoly empires in so-called pharmerging countries like South Africa, pharmaceutical industries in developed countries are claiming that reduced IP protection in South Africa will ruin the monopoly profits needed to incentivize research in the next generation of life-saving medicines.
There are two flaws in this argument. First, given South Africa’s very small percentage of global pharmaceutical sales, there is little evidence to support claims that its adoption of public health safeguards will undermine the development of future medicines, particularly in light of the significant annual profits recouped by the pharmaceutical industry. Moreover, expenditure by pharmaceutical companies on R&D pales in comparison to expenditure on marketing and profits. In general, pharmaceutical companies spend almost twice as much on marketing as they do on R&D while simultaneously recouping massive profits. Secondly, pharmaceutical priorities are already skewed in favor of developed world conditions which generate profits, at the expense of neglected diseases like malaria and tuberculosis. Abandoning patent reform in South Africa will not re-direct resources to diseases already deemed unprofitable by the pharmaceutical industry.
The proposed reforms should not be misconstrued as an elimination of patents, but merely a recalibration of the existing patent system to take greater account of South Africa’s unique health, developmental, social and economic needs. Stricter patent standards, far from undermining future innovation, will simply prevent the abuse of low quality patents that provide no new innovation or therapeutic benefit. Moreover, the reforms being proposed are neither radical nor new. They are perfectly legal under international intellectual property law (particularly TRIPS) and have been implemented by other developing countries such as Brazil.
Documents leaked in January 2014 revealed that foreign pharmaceutical companies, led by the Pharmaceutical Researchers and Manufacturers of America (PhRMA), had enlisted the help of a consulting firm in Washington D.C. to campaign against the introduction of new patent laws in South Africa. The $450,000 campaign was justified by pharmaceutical lobbyists on the basis that “South Africa is now ground zero for the debate on the value of strong IP protection. If the battle is lost here, the effects will resonate…not just in South Africa but eventually in much of the rest of the developing world.” The pharmaceutical companies involved in this campaign include Bayer, GE, Johnson & Johnson, Merck, Novartis and Pfizer.
Health activists expressed shock and disappointment that such a significant sum was being invested to interfere with the democratic process. Médecins Sans Frontières (MSF) argued that the industry’s response was “unacceptable in a country facing one of the world’s most acute HIV and [tuberculosis] epidemics”, noting that medicine prices are up to 35 times higher in South Africa than in countries where generics possess greater market share. In March 2014, health activists from TAC, SECTION27 and MSF marched on the offices of the Department of Trade and Industry in Pretoria and Cape Town, demanding that new intellectual property laws be tabled in parliament before the 2014 elections.
Foreign resistance to South African patent law reform is not only pseudo-imperial, but highly hypocritical. Many of today’s developed countries provided weak intellectual property protection during their transition into highly industrialised economies, as they imitated technologies from wealthier countries in order to develop their own industries. To prevent developing countries now from taking the same path to economic growth is to kick away the ladder of success from those who are only beginning to climb. Moreover, developed countries have themselves utilized various TRIPS flexibilities whilst simultaneously campaigning against their use in the developing world. The United States is perhaps the world’s most frequent user of compulsory licensing, yet continues to discourage developing countries from doing the same. Developing countries should not be forced to sacrifice the policy space that richer countries harnessed in the early stages of their own growth.
In October 2014, MSF wrote an open letter to South African President Jacob Zuma, urging the Department of Trade and Industry to release the final version of its National Policy on Intellectual Property. MSF praised South Africa’s progress in HIV treatment over the last decade but expressed concern that other significant health challenges would be difficult to address without greater access to generic medicines. MSF encouraged bold reforms which would limit abusive patent monopolies, promote generic competition, permit patent barriers to be overcome when critical medicines were priced out of reach, and incentivize models of innovation that would not rely on high product prices to recoup R&D costs.
Ensuring that South African patent law reform proceeds is not merely a matter of asserting national sovereignty or rejecting Western IP-imperialism. It’s a matter of life and death. Unless the imbalance in the patent system is adressed, drug prices are likely to rise alongside growing treatment resistance, further endangering the lives of many South Africans. As long as medicines remain unaffordable, people will pay with their lives.
Written by Katrina Geddes.
Published on 27 January 2015.
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