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PhRMA attacks South Africa on Parallel Imports
The following story from the Journal of Commerce reports PhRMA's efforts
to mobilize the U.S. government against South Africa's proposed
legislation on pharmaceuticals. The two main features of the SA
legislation are a program to promote generic substitution and to permit
"parallel imports" of medicines. Parallel imports would permit South
Africa to buy pharmaceuticals on the world market, and import them,
getting the "best world price" for the drugs. There are now very large
differences in prices between countries for the same drug (manufactured
and sold by the same company), providing opportunities for SA to shop
around. Parallel imports of pharmaceuticals are common in several
European countries, and as I have I discussed in some detail in my
recent testimony to the South African parliament, quite legal under
international law. PhRMA doesn't stand a chance of winning a WTO appeal
on this, but they want the US to apply more bilateral pressure on South
Africa, which is a widely watched example for less developed countries.
People might also be interested in the Nov/Dec issue of Mother Jones,
which does a nice job of reporting US government pressure on the South
Africa government, regarding the SA efforts to promote generic drugs.
Wednesday, November 5, 1997
US gets headache over South Africa drug patent plan: Trade officials
say law erodes protection
BY PAULA L. GREEN, JOURNAL OF COMMERCE STAFF
U.S. trade officials are anxious to talk with their South African
counterparts about new legislation that U.S. drug manufacturers claim
guts the African nation's patent protection for medicines.
The legislation, expected to kick in by year's end, runs counter to
the global trend of tougher intellectual property laws in emerging
economies. It also runs against a global trade accord that requires all
World Trade Organization members to provide 20 years of patent
protection by the year 2005, say U.S. government officials.
'Moving the other way'
"There's a fear that South Africa is moving the other way. They're
shooting holes in (existing law)," said a U.S. trade official. Unlike
other emerging economies like Brazil, Argentina and India, South Africa
has had adequate patent protection for drugs on the books for many
years. The new legislation erodes this protection, U.S. officials
The current controversy stems from a bill, call the Medicines and
Related Substances Control Act Amendment Bill 1997, that was approved
by the country's National Assembly last month. The bill now heads for
the Council of Provinces and a presidential OK before it becomes
Affordable drugs sought
South African officials have said the bill is meant to ensure a supply
of more affordable medicines within the country's $2.5 billion
pharmaceutical market. Yet U.S. drug companies are unhappy with the
legislation and claim it violates the global Trade-Related Intellectual
Property accord, also known as Trips, that was wrapped up in 1994 as
part of the Uruguay Round of the General Agreement on Tariffs and
"This is a clear violation of Trips," said Tom Bombelles, an official
at the Pharmaceutical Research and Manufacturers of America in
Washington. He said South African officials have indicated in press
reports that the world community can take South Africa to the WTO if
they are unhappy with the new law.
Officials at the South African Embassy in Washington could not be
reached for comment.
"We're analyzing our options," said Mr. Bombelles. "If a country
doesn't value a company's most important assets, its intellectual
property, then how committed can they be to new investment?"
South Africa has tried more aggressively to attract foreign investment
since the official end of apartheid. For the fiscal year ending May 1,
1997 -- the third year since the election of President Nelson Mandela --
total foreign direct investment topped $7.8 billion.
About 15 U.S. companies hold approximately 30% of the $2.5 billion South
African pharmaceutical market, followed by South African firms, which
have a 20% share of total sales. Companies from Britain have the
third-place spot, with 19%, followed by Switzerland at 13%.
Worse than previous bill
U.S. companies have been especially irked that the current
legislation is even more damaging than a previous bill they opposed when
it was introduced this spring. The first bill was withdrawn by the
health ministry. The new version no longer restricts the use of
trademarks, but it hands the government even more power to erode the
shelter given by patents.
Like many patent laws in developing
countries, the South African legislation allows for practices like
parallel imports. Industrial nations and their drug multinationals are
generally opposed to parallel imports, which allow a business to import
a patented drug from a third country without the consent of the patent
That means a South African importer could bring in a U.S.
multinational's medicine from Brazil, for example, where the drug might
be less expensive, and then sell it in the South African market. U.S.
drug companies dislike the process because they say it upsets their
distribution channels in the local market and undercuts their prices.