Author: Prepared by the Communication Unit, Department of Health (Govt. of South Africa). Issued by Department of Health.

Date: Pretoria, 2 March 2001.

Title: Briefing document: Defending the Medicines Control Amendment Act

Original language: English.

Concerning: The briefing document explains the South African government's defence of its disputed Medicines Control Amendment Act, which 41 pharmaceutical companies are attacking legally in a Pretoria High Court lawsuit, March 5-13, 2001. The Act, among other things, would enable the SA government to import cheap generic drugs.

Source: Government of South Africa

Briefing document: 

Defending the Medicines Control Amendment Act

What the forthcoming case is about

Introduction

In the Pretoria High Court, between March 5 and March 13, the South African Government will defend the Medicines and Related Substances Control Amendment Act (No 90 of 1997) against legal attack by 41 pharmaceutical companies.

The pharmaceutical companies are mostly local subsidiaries of multinational corporations and act under the umbrella of the Pharmaceutical Manufacturers' Association (PMA).

The Act (referred to for convenience as the Medicines Act) was enacted during the term of President Nelson Mandela who is therefore cited as the first respondent. It is a critical instrument for achieving the Government's National Drug Policy which has the goal of ensuring "an adequate and reliable supply of safe, cost-effective drugs of acceptable quality to all citizens of South Africa and the rational use (of drugs) by prescribers, dispensers and consumers".

The pharmaceutical industry was consulted during the development of the National Drug Policy. And, after this policy was translated into law through the Medicines Act, the South African Government once more attempted co-operative engagement with the industry. In January 1998 we made proposals to the industry to deal with some of their concerns through the process of developing regulations under the Act.

However, the preferred course of the pharmaceutical companies has been litigation.

It is because this law is so fundamental to transforming our highly inequitable health care system to benefit even the poorest sections of our society that we will defend this costly action to the fullest extent. The inequities in health care in South Africa, and the problems in relation to universal access and adequate quality, run so deep that they demand major structural interventions -- not a mere tinkering at the margins.

The history of the Act and the case

The pharmaceutical companies first brought this action in 1998. At that time, they obtained an interim interdict which prevents the Government from implementing the contested sections of the Medicines Act pending the outcome of the forthcoming case.

At virtually the same time, the United States Trade Representative put South Africa on the Special 301 Watch list in May 1998, acting in terms of the United States Trade Act of 1974. Eighteen months later it dropped South Africa off the 301 Watch List.

This followed talks between the two governments that led the White House to release a statement (in September 1999) declaring that "the two governments have identified common ground with respect to South Africa's implementation of its so-called 'Medicines Act'. The United States very much appreciates South Africa's assurance that, as it moves forward to bring improved health care to its citizens, it will do so in a manner consistent with its international commitments and that fully protects intellectual property rights."

The statement was issued by the White House not because South Africa undertook withdraw or amend the Medicines Act, but on the basis of our arguments that the provisions of the Act were not inconsistent with the Trade Related Intellectual Property Rights (TRIPS) Agreement.

Provisions of the Medicines Act that relate to intellectual property rights are at the heart of the imminent court case. Many of the arguments that succeeded in the political sphere during the Clinton Administration will be raised in court. However, our defence will also have to address more technical and procedural matters in answering the pharmaceutical companies' case.

The applicants' position

The drug companies are contending that the courts should strike down numerous sections of the Medicines Act because they contradict the Constitution of South Africa in various ways. These include:
* The extent of the powers conferred on the Minister of Health.
* Deprivation of intellectual property in a manner that amount to expropriation without compensation.
* Various forms of discrimination against sections of pharmaceutical industry.
* Restriction of freedom of trade.
* Failure to comply with legislative procedures set down in the Constitution.

The applicants also argue that some of the provisions are in conflict with the TRIPS Agreement which is binding on South Africa.

It is not the purpose of this document to answer these allegations in any detail. Such arguments must -- clearly -- be addressed to the court and the court alone. It is, however, useful to explain some of the procedures and concepts contained in the Medicines Act that are likely to be featured in the court case.

Relevant provisions in the Act

Parallel importing of drugs

It would be possible in certain instances for South Africa to obtain a patented drug more cheaply from a foreign supplier than from the local subsidiary of the same manufacturer - that is, the local patent holder - provided that the drug is in the market with the consent of the patent holder. Such purchasing is known as parallel importing and this is dealt with in Section 15 of the Medicines Act.

Generic substitution

The generic substitution provision in the Medicines Act obliges pharmacists to inform the client about a generic equivalent when the doctor has prescribed a more expensive brand name and offer the former to the client. The final choice rests with the client.

The law also permits the doctor to write "do not substitute" on the prescription if there are good grounds for insisting on the brand name. Furthermore, generic substitution is not allowed in respect of a list of "non-substitutable" drugs compiled by the Medicines Control Council.

Eradicating perverse incentives

The Act aims to remove perverse incentives from the marketing of medicines. We believe that the pervasive drug company practices of providing samples and bonuses to pharmacists and prescribing doctors distorts the market and interferes with rational treatment.

The Medicines Act forbids bonusing and sampling and it empowers the Minister of Health to prescribe a Code of Conduct for the marketing of pharmaceutical products.

The Pricing Committee

The Act proposes the establishment of a National Drug Pricing Committee that would collect market intelligence on drug pricing and advise the Minister of Health. The government envisages that, although pharmaceutical companies should be free to determine the price of their products, there should be a transparent pricing system that would allow the committee to undertake informed comparative studies and advise the Minister accordingly.

Licensing Dispensing Doctors

Large numbers of dispensing doctors in South Africa earn more from selling medicines than from their professional fees. Dispensing doctors do not currently need a licence to stock and sell medicines -- but the Act would introduce this control.

Concluding comments

The Medicines Act has its roots in a health sector policy committee that was set up in the months following South Africa's first democratic election in 1994. The provisions of the Act derive directly from the overwhelming concern of the first post-apartheid government to inject social justice into health care provision; to ensure that every citizen -- and not just a privileged minority -- has access to an acceptable quality of basic health care.

It is ironic that this concern has been narrowed down to a legal debate on health care as a profit-making concern, where the question of trade interests dominates the discourse. It is more ironic that the South African Government is suspected by some of its opponents to be using the issue of affordable health care as a smoke screen for its "real" ambitions to become an exporter of cheap and competitive generic medicines.

The authenticity of our stated goal should be clear to anybody who takes account of the origins of the Act, its scope (which includes the transformation of many domestic practices) and the massive health care challenges that we face in this country.

We want to reassert that the Medicines Act is a critical instrument in our struggle to attain affordable health care for all. Access to health care is a right enshrined in our Constitution and progressive realisation of that right is a duty that we, as the democratically elected government of this country, take very seriously and will pursue through all available channels.

Prepared by the Communication Unit, Department of Health

Issued by Department of Health, 2 March 2001

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