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PRETORIA (Reuters) - AIDS activists rejoiced Thursday after the

world's richest drug makers appeared to wilt under

public pressure and withdrew from their legal battle to

stop South Africa importing generic AIDS drugs.

The decision by 39 drug firms to drop the landmark

court case was hailed as a major victory for the world's poorest

countries in their efforts to import cheaper drugs to combat an

epidemic that affects more than 25 million Africans alone.

" The outcome of the case signals a dramatic shift in he balance

of power between developing states and drug companies, " Oxfam,

Medecins Sans Frontieres and the South African Treatment Action

Campaign said in a joint statement.

" It sends a clear signal to the African heads of state that lives

should and can take precedence over patents, " they said.

The crux of the South African case was its right to buy or

produce cheap generic drugs.

The drug companies have negotiated deals with individual

countries to slash the price of triple drug combination therapy

which costs about $10,000 a year in the United States to about

$1,000. But the same drugs can be bought from generic producers

for as little as $300.

The deal between the drug firms and Pretoria was brokered this

week during talks between U.N. Secretary-General Kofi n and

South African President Thabo Mbeki, drug company and government

officials said.

Oxfam senior policy adviser Watkins said the industry was

forced to withdraw to limit the public relations disaster caused\

by the attempt to enforce First-World prices in Third-World

economies.

" The drug industry is throwing the towel into the middle of the

ring.

" This case should never have happened. We have lost three years

in the fight against AIDS, but it is a great victory for the

people of South Africa and for the global campaign to make drugs

more affordable, " he said.

The collapse of the South African court case over importing cheap

AIDS drugs could spark changes in international trade laws that

will improve access to medicines in poor countries, aid groups

predicted Thursday.

Forsyth, Oxfam policy director told Reuters: " On the

global level it may be the beginning of a much bigger change for

cheaper medicines being available to poor people. "

ACTIVISTS REJOICE

Outside the court, black and white demonstrators, many of them

already ill with the Acquired Immune Deficiency Syndrome (AIDS)

or carrying the Human Immunodeficiency Virus (HIV)that causes

it, danced and cheered when they heard the news that may get

drugs to the country's 4.7 million people living with AIDS.

Zackie Achmat, another HIV sufferer and head of the Treatment

Action Campaign (TAC), said the case epitomized the biblical

fight of and Goliath.

" This is a real triumph of over Goliath, not only for us

here in South Africa, but for people in many other developing

countries who are struggling for access to healthcare, " he said.

South African Health Minister Manto Tshabalala-Msimang threw her

arms in the air and then hugged her senior officials before

cracking open bottles of champagne.

" This is a victory not just for South Africa, but for Africa and

the whole developing world, " she said.

The World Health Organization also welcomed the deal, saying it

would allow Pretoria and the drug firms to made progress on

generic drug substitution and greater competition in state drug

procurement programs.

The International Aids Society, which represents mainly medical

doctors and researchers, also welcomed the court move.

" The public opinion storm against international pharmaceuticals

companies had brought the spotlight on the AIDS catastrophe in

Africa, " Lars Olof Kallings, Secretary General of the society

told the Swedish TT news agency.

DRUG FIRMS CLAIM VICTORY FOR BOTH SIDES

GlaxoKline, the world's top supplier of HIV-AIDS drugs, said

the settlement cleared the way for cheap drug imports was a

victory to both sides.

Chief Executive Jean-Pierre Garnier dismissed suggestions that

the industry's decision was a defeat, but he conceded there were

concerns that cut-price drugs may flow back to North America,

Europe and Japan, eroding profit margins.

" Clearly this is a worry and we have said that we need to be

vigilant, " Garnier told Reuters in an interview.

GlaxoKline's South African head Kearney said that the

ball was now firmly in South Africa's court to deliver AIDS drugs

to its people.

The pharmaceutical industry's international body welcomed the agreement

clearing the way for the import of cheaper drugs, saying it is a " major

victory for patients. "

South Africa reaffirmed in the accord its commitment to international \

obligations including the TRIPS agreement, that it would only use

compulsory licensing under extreme circumstances and said it would

consult drug makers and the public on implementing drug-related laws.

South Africa also agreed to consult the industry on a 1997 law allowing

for so-called parallel imports of patented drugs and the generic

substitution of key medicines.

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Drug Companies Withdraw AIDS Drug Lawsuit AgainstSouth Africa

The Pharmaceutical Manufacturers Association of South Africa and

39 pharmaceutical companies today agreed to drop their lawsuit against

the South African government over a law that would allow the country

to import and manufacture cheaper generic AIDS drugs, the South African

Broadcasting Corporation reports

South African Broadcasting Corporation, 4/19). BBC News reports that

AIDS activists cheered when the announcement was made after a hearing

that " lasted less than a minute " (BBC News, 4/19). In an " unconditional

surrender, " the drug companies agreed to accept " virtually all of the

legislation, " but are urging the government to rewrite a " key

section " of the law " to clarify and limit the circumstances in which

it can grant compulsory licenses for third parties to manufacture

patented medicines at a lower price. " Britain's Guardian reports that

South Africa has not indicated whether it will " give ground " on this

issue, but the government has already said that its " primary interest "

is not manufacturing copies of patented drugs, but importing and

manufacturing generic drugs (McGreal, Guardian, 4/19).

Under the agreement, South Africa " promise[d] " that the implementation

of its 1997 Medicines and Related Substances Control Act would comply

with the rules of the World Trade Organization. The

Wall Street Journal notes that this was a " promise the

government has agreed to make for years, but the industry had long

insisted wasn't enough " (Block/, Wall Street Journal,

4/19). The drug companies also agreed to pay costs incurred by the

South African government related to the lawsuit (South African Broadcasting

Corporation, 4/19).

Avoiding a PR 'Disaster'

With today's withdrawal of the suit, the pharmaceutical companies "

will stave off another public relations disaster, " the Guardian reports.

The industry has faced a " groundswell of public and government

opposition, " which caused some of the " largest firms " involved in

the case to " rethink their strategy. " In addition, if the case continued,

the companies faced having to reveal " some of their most closely guarded

business secrets, " such as pricing policies, profit levels and the source

of funding for AIDS drug research (Guardian, 4/19). NPR's

reports on " Morning Edition " that the " industry realized that

this was a losing proposition. [south Africa] is a very small market ...

less than 2% of their [total AIDS drug] market. ... I think they

saw that even if they won the case, their image would suffer in the long

term " (, " Morning Edition, " NPR, 4/19). The Guardian reports that

a " split " had developed between the Pharmaceutical Manufacturers' Association

nd some of the larger firms in the case, who now say that the case " should

never have been pursued " and were " disturbed at the content of some

submissions by PMA lawyers. " For example, the trade group had argued

that " unless there were financial returns there was little incentive for

drug companies to develop new AIDS treatments " (Guardian,

4/19). In an effort to stave off increasing damage to their " collective

image, " five companies that manufacture AIDS drugs --

Merck & Co., GlaxoKline, Bristol-Myers Squibb, Boehringer Ingelhiem and

Roche -- " pushed hard for a settlement. " The remaining companies " reluctantly

agreed to go along " Wall Street Journal, 4/19). The Guardian notes

that the drug industry " has ultimately achieved the very thing it tried to

prevent - encouraging governments across the developing world to use the law to

obtain more affordable drugs " (Guardian, 4/19). The case " will go down in

history ... as one of the great corporate PR disasters of all time, " and

the " hard lesson that the big pharmaceutical companies have been taught ... is

that there can be no global marketplace without a world sense of right

and wrong " (Denny/Meek, Guardian, 4/19).

Great Expectations

South African officials indicated that they were ready to implement the

law " within weeks " once the legal challenge was dropped (Guardian, 4/19).

PMA CEO Mirryena Deeb said that the South African government had agreed to

consult the drug firms when drafting regulations to implement the

law. BBC News noted that the " pressure will now be on the government to

come up with a treatment plan for the 4.7 million people estimated to be

HIV-positive " in South Africa (BBC News, 4/19). During settlement

negotiations, the industry originally promised to help " run partnerships on

AIDS programs. " But South African President Thabo Mbeki faxed back a change

in the settlement draft -- crossing out " AIDS " and replacing it with

" communicable diseases. " This move " chilled " some in the industry as a

reminder of Mbeki's " oft-cited belief that AIDS is simply a disease of poverty,

not of infection with [HIV]. " However, South Africa's drug regulatory body,

the Medicines Control Council, yesterday signaled their commitment to

curbing the AIDS epidemic by finally approving nevirapine, a drug

that reduces the risk of vertical HIV transmission, after a

seven-month delay. But a " longstanding " pilot project to give the drug to

90,000 expectant mothers across the country still awaits

cabinet approval. The cabinet is " reportedly concerned about what it calls

the long term cost implications " of the program. In July last year,

Boehringer offered to donate the drug to South Africa free of

charge for a period of five years, but it " is still not certain " that

the government will accept the offer (Wall Street Journal, 4/19).

Implications for Brazil

As the South African case draws to a close, attention now shifts

to the suit being brought by the U.S. government and the Pharmaceutical

Research and Manufacturers Association of America against Brazil. The

plaintiffs argue that Brazil, which manufactures cheap copies of patented

AIDS drugs, is " flouting " the Trade Related Aspects of Intellectual Property

Rights agreement. The Guardian notes that Brazil differs from South Africa

in that the country is " much richer " and is a " genuine potential market " for

AIDS drugs. But the country's supporters say Brazil is a " successful example

of how a relatively poor country can treat AIDS if it has access to cheaper

generic drugs, " as the number of AIDS deaths in the country have halved

since the government began offering reduced-cost treatment. In light of the

outh Africa case, the Guardian notes that Merck and Pfizer, which are leading

the campaign against Brazil's generics industry, " must be reevaluating their

strategy. But it will be harder for big drug companies to admit defeat on this

one " (Guardian, 4/19).

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Firms drop drug case, AIDS groups rejoice Reuters NewMedia - April 19, 2001

Swindells http://ww2.aegis.org/news/re/2001/RE010440.html

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