Drugs giants flex muscles as SA tries to cut health bill

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The Independent Online
South Africa is daring to take on the major players of the pharmaceutical industry. Mary Braid watched the drugs multinationals fight back. It was not a pretty sight.

The heavy threats began on Monday. Merck, the major United States pharmaceutical corporation, warned that it might pull out of South Africa - taking thousands of jobs and a proposed 50 million rand (pounds 7m) investment with it - if health minister Dr Nkosazana Zuma did not withdraw plans to import patented drugs.

Then the US waded in. With 12 American pharmaceutical companies, with a combined revenue of R705 billion (pounds 100bn), operating in South Africa, the US ambassador James Joseph called for the removal of a clause in legislation aimed at curbing health costs.

On the face of it, the legislation proposed by the stubborn Dr Zuma, a juggernaut of a minister, is a modest one, and complies with the free- market principles so cherished by the pharmaceutical giants.

Struggling to create the country's first national health service, she wants the multinationals to reduce their South African prices. If they do not, she promises to buy their drugs from countries where they already sell them cheaper.

Mr Joseph insisted that the clause overrode "universally accepted principles of patent protection"; patents which the drug companies argue provide the investment for medical research. He also had a warning. The new legislation would send a negative signal about intellectual property rights to technology companies which might otherwise play a crucial role in South Africa's development.

Finally, the International Federation of Pharmaceutical Manufacturers said the legislation's assault on patent protection could result in South Africa being denied access to any anti-Aids drugs which might come on the market. That is no idle threat in a country where HIV infection is rising at an alarming rate.

The drug companies insist that the move violates World Trade Organisation agreements. Dr Zuma disagrees. And she also promises that where company patents in SA have expired she will shop abroad for cheap generics, to encourage home producers of generics to cut their prices.

Dr Zuma's adviser, Dr Wilbert Banenberg of the World Health Organisation, calculates that R385 million (pounds 57m) could be saved by buying cheaper drugs on the world market.

The companies insist they are being unfairly targeted and that South Africa's drug mark-up, of up to 82 per cent, is the fault of middle men and South Africa's inefficient and corrupt distribution system.

But Charles Medawar, author of several books on the pharmaceutical industry, says South Africa is getting the textbook treatment reserved for countries - particularly in the Third World where there is less trade muscle - who refuse to play the international pharmaceutical game. "The companies have a well-deserved reputation for overbearing behaviour," he said.

While the industry has a point about research funding, its enormous profits suggest the balance is wrong. Mr Medawar says South Africa should ignore threats about access to future Aids drugs. The companies will undoubtedly price any new medication out of their pocket anyway.

Despite the might of the industry, rebellions occur from time to time and the pharmaceutical giants fight - and win - in almost every case. In the mid Eighties the government of Bangladesh attempted to introduce an essential drug list and remove many other products from the market. Its campaign collapsed within days of industry threats to deinvest. "It was a small market but the drug companies feared a domino effect," Mr Medawar said.

"These companies prefer a totally free, unregulated market and they have enormous resources and powerful backers. If it was possible we should place more emphasis on the rights and responsibilities of them than we do on governments. They are not elected and yet their managers take decisions which mean life and death to communities all over the world."

Dr Zuma is undoubtedly up against formidable opponents, and with wider trade implications affecting other ministries now spelled out, her chances of winning seem slim.

It does not help that she does not have the country's doctors fully on side. Her plans to introduce a year's compulsory community service for medical graduates, who normally make a beeline for the private sector, has caused some alienation.

The Medical Association of South Africa is also opposing Dr Zuma's intention to impose the use of generic medicines. There is evidence of overprescribing among doctors. The relationship between doctors and drug companies, already considered too cosy by the department of health, is also the target of planned Zuma legislation. It may be that she has taken on too many opponents at one time.