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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
  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.