Intellectual Property policy a test of government's commitment to health and the Constitution

It has been over six years since the government began developing the draft policy on intellectual property that has been the focus of major public controversy following the PharmaGate scandal. The draft policy proposes measures that will improve the ability of all in South Africa to access life-saving medicines. Whether or not the current ANC led government can finalise a good policy presents a clear and concrete test of both their commitment to improving the health system (a Constitutional obligation) and their ability to deliver essential policy reforms. Failure to finalise the policy before the elections would show that the current administration are either incompetent, or have bowed down to foreign industry pressure to delay the policy.
 
Without urgent finalisation of the policy, South Africa will continue to face excessively high medicines prices. Only generic competition has consistently proven to bring drug prices down to their lowest level, yet generic competition is often blocked in South Africa due to low quality patents. Instead, many medicines here continue to be priced far out of reach. For example, Trastuzumab to treat breast cancer costs over R550,000 for annual treatment, higher than in India, Belgium or even the UK. Aripiprazole to treat depression, costs 35 times more than in India and will remain under patent protection until 2033. Linezolid, one of the only effective treatments for drug resistant TB, is priced at R676 per pill, whilst it is available at only R25 per pill in India. Imatinib, to treat cancer, is still 91% more expensive than the generic equivilent in India. These are not stand alone cases and they are costing the government billions and ballooning South Africa’s pharmaceutical trade defecit.
 
So why is the DTI delaying the release of a policy that could rebalance the system to protect the right to access healthcare?
 
The Treatment Action Campaign first learned of the IP policy in September 2011 in a letter from Department of Trade and Industry Minister Rob Davies who explained the policy would “ensure that the flexibilities relating to access to medicines and health are incorporated into national legislation”. The Innovative Pharmaceuticals Association of South Africa (IPASA - an industry body that represents multinational pharmaceutical companies in South Africa) would have you believe that the process has been rushed and unconsidered. That additional time should be set aside to assess the situation and proposed solutions. The leaked pharmagate documents showed a R6 million strategy to delay the process in just this way. Whatever IPASA may say, the truth is that there has been extensive consultation on the policy. Both industry and civil society has had ample opportunity to state their positions in submissions and in face-to-face meetings – in fact industry has had better access to officials in the DTI, gaining prior access to documents and influencing the drafting process. Below is a timeline to date that provides clarity on developments:
 
 
-        In August 2011 the DTI held a meeting to solicit views from external stakeholders in shaping the IP Policy. Civil society were not present at this meeting and instead found out after the fact (in the Sept 2011 letter).
 
-        In September 2011 Minister Rob Davies wrote to the TAC to say that the DTI was developing an IP Policy to ensure that flexibilities relating to access to medicines and health are incorporated into national legislation.
 
-        In May 2012 the DTI shared an early draft of the IP policy with the TAC and MSF, promising that the IP policy would be released for public comment in July 2012.
 
-        The May 2012 draft document included extensive comments from the pharmaceutical industry, thus revealing that industry was consulted prior to May 2012 and the involvement of civil society.
 
-        Among other meetings and consultations, the DTI hosted the Africa IP forum in February 2013, which was attended by many intellectual property experts from across the world. Given the repeated missed deadlines to release the IP Policy, the TAC picketed the Forum.
 
-        In August 2013 the TAC, SECTION27 and MSF delivered a memorandum of demands at a DTI workshop on intellectual property held by the World Trade Organization, World Health Organization and World Intellectual Property Organization.
 
-        On September 4th 2013, the Draft National Policy on Intellectual Property was released for public comment. The TAC, SECTION27 and MSF submitted a joint submission of recommendations to the DTI. Comments were also submitted by IPASA, the National Association of Pharmaceutical Manufacturers (NAPM), and a coalition of academics specialising in intellectual property.
 
-        In December 2013 at the 3rd Global Congress on Intellectual Property and Public Interest held in Cape Town, a representative from the DTI indicated that the policy would be finalised and released in early 2014.
 
-        In January 2014, a plot supported by the IP committee of IPASA and drawn up by the American PR firm PAE was exposed in the Mail & Guardian. A central aim of the plot was to delay finalisation of the policy until after the elections.
 
-        Shortly after the pharmagate scandal broke in January 2014, Minister Rob Davies told the website IP-Watch that the policy “is not likely to be completed before the end of this administration”. However, he was soon after contradicted by Macdonald Netshitenzhe, chief director of intellectual property at the DTI, who told the Business Day newspaper that the policy was expected to be submitted to cabinet in March 2014.
 
As the above shows, this has not been a rushed process. Quite the opposite, the policy has already crossed two ANC administrations and has been extensively consulted on.
 
The reforms proposed in the draft policy are not radical. Each reform is entirely lawful. Each reform is sanctioned by the World Trade Organization, the World Intellectual Property Organization, and the World Health Organization. Each reform is in accordance with international intellectual property law (the TRIPS Agreement). Similar reforms have already been implemented in other developing countries such as Argentina, Brazil and India. There is no legal reason to delay the policy any further. To the contrary, the Constitution demands that such reasonable legislative measures that would increase access to healthcare must be implemented.
 
Furthermore, we have seen no compelling evidence that the policy would harm the South African economy or reduce foreign direct investment. In fact, indications are that the proposed policy would benefit the economy by making local manufacturers of generic medicines more competitive and by reducing the pharmaceutical trade deficit. For a thorough discussion of the social and economic impact of the proposed law reform see this TAC research paper. In addition, we know that experts from other developing countries are willing to provide technical assistance to the DTI to help finalise the policy.
 
The only party who is served by a delay in the finalisation of the policy is the foreign pharmaceutical industry who would continue to benefit from our extremely lax patent system. We urge the DTI to show leadership by not bowing to industry pressure and releasing a good policy in line with Constitutional requirements before the elections. Whether the current ANC administration can deliver will provide a clear indication of their commitment, or lack there of, to the Constitution and the health of all in South Africa.
 
 
Why the proposed policy reform will make medicines more affordable
 
South Africa’s current system for granting patents is a dream for the foreign pharmaceutical industry. South Africa does not examine patent applications to assess their validity, instead so long as the appropriate paperwork is filled out and fees are paid, the patent will be granted automatically. As a result, South Africa grants more patents than most developed and developing countries. In 2008, South Africa granted 2,442 pharmaceutical patents (only 16 of which were for South African companies), whereas Brazil granted 273 patent applications between 2003-2008. Studies show that on identical applications South Africa grants 40% more patents than even the US and Europe.
 
IPASA attempted to confuse the South African public by stating that they ‘were not extending their patents – as patent extensions are not allowed in South Africa’. This needs unpacking to reveal the truth. A patent term extension refers to an instance when patent protection is extended beyond the 20 years established in the TRIPS Agreement. IPASA is technically correct in stating that South Africa does not have these measures in place. To be clear, this is not how monopolies on medicines are extended here. Instead the pharmaceutical industry extends their monopolies through the use of secondary patents. Companies file patents for new uses of medicines, or make obvious minor improvements or modifications to a known drug, in order to gain a secondary patent on the existing compound. This is a process known as “ever-greening” that has become increasingly prolific in recent years. Patents obtained are often strategically used to block competition and maintain continued revenue streams. Secondary patenting and subsequent patent litigation disputes have a direct negative impact on access to generic medicines.
 
 
Common misconceptions on R&D, foreign investment and the economy
 
IPASA, MSD and allies have consistently used the argument that if South Africa makes it more difficult to gain patents, it will undermine all future innovation. This is misleading. Instead it will assist in protecting countries from low quality patents that provide no new innovation or therapeutic benefit. True innovations and new cures will still receive patents. However, the proposed reforms will reduce the incentive to channel R&D funds into mere reformulations or modifications of existing medicines. In this way the incentive for true innovation will actually increase if we raise the bar for patentability.
 
Another common misconception is that stricter IP controls lead to increased foreign capital investment, as extensively referred to in the PAE documents. If this were in fact true, given that almost all patent applications are granted in South Africa, more than most other developed and developing countries, South Africa should be awash in investment. The real story is that since complying with the TRIPS agreement, 35 manufacturing plants have shut down in South Africa, moving operations to countries with cheaper labour and production costs and other economic incentives. Whilst India, who proactively adopted legal TRIPS flexibilities to limit intellectual property protection specifically in order to protect health and local industry, realised foreign direct investment of US$1 billion to their pharmaceutical industry from April-June 2013 according to the Economic Times.
 
If we look at local production, the archaic laws in South Africa continue to protect foreign interests at the expense of domestic companies, who are unable to enter the market for extended periods of time. The National Association of Pharmaceutical Manufacturers (NAPM) reacted positively to the proposed reforms, agreeing with much of the IP policy, given the impact to be felt by (mostly generic) South African producers.
 
In terms of the economic impact of the current IP regime, the Department of Health spent R5 billion in 2012 on procuring imported medicines. The import of pharmaceuticals is the fifth largest driver of the trade deficit, raised as a major concern by the DTI. Whilst the greatest volume of medicines in South Africa comes from the generics-heavy market of India, and most active pharmaceutical ingredients are sourced in China, the greatest expenditures on medicines are routed to Germany, the U.S., and France, showing that the import of branded medicines is the significant driver of this expense. The PAE document highlighted that there are many non-IP related issues to accessing health care in South Africa, which is true. However it is essential to remember that every Rand spent on procuring expensive branded medicines is money diverted from the wider health system. The ANC’s ability to improve health care in the country, and the success or failure of the National Health Insurance scheme, depends greatly on the outcome of the IP policy.
 
 
For media enquiries please contact:
Lotti Rutter
+27 81 818 8493
lotti.rutter@tac.org.za
 
 
Notes to editors:
 
- TAC/S27/MSF submission of recommendations: http://www.fixthepatentlaws.org/?p=764
- NAPM submission: http://www.fixthepatentlaws.org/wp-content/uploads/2014/02/COMMENT-BY-THE-NAPM-ON-THE-DRAFT-IP-POLICY-ISSUED-BY-THE-DEPARTMENT-OF-TRADE-AND-INDUSTRY.docx
- Academics submission: http://ip-unit.org/2013/ip-unit-submits-its-comments-regarding-dtis-draf...
- IPASA submission: http://ipasa.co.za/wp-content/uploads/2014/01/Copy-of-IPASA-submission-on-the-draft-national-policy-on-IP-final-131016.pdf