[Ip-health] SA GSK settlement announced

[sean.flynn@cptech.org]

Original announcement of Commission's findings pasted below (explaining
refusal to deal, essential facilities and excessive pricing grounds).

COMPETITION COMMISSION
MEDIA RELEASE NO. 33 OF 2003
10 December 2003
Competition Commission Concludes an agreement with pharmaceutical firm
The Competition Commission has concluded a settlement agreement with
pharmaceutical firm GlaxoSmithKline South Africa (Pty) Ltd (GSK) and is in
discussions with Boehringer Ingelheim (Pty) Ltd (BI) regarding a
settlement agreement.
The settlement agreement is the result of negotiations following the
Commission=92s announcement in October 2003 that GSK and BI had, in its
view, contravened the Competition Act of 1998. From its investigation into
the complaints by Hazel Tau and others, the Commission concluded that GSK
and BI had abused their dominant positions in their respective
anti-retroviral (ARV) markets.  This was denied by GSK and BI.
The Competition Commissioner, Menzi Simelane, said he was happy that all
parties concerned had agreed to the terms of the settlement agreements as
he believed that the agreements addressed the competition concerns raised
by the Commission.
=93The terms of the agreements are substantially similar to the successful
outcomes which we would have hoped to achieve at hearings before the
Tribunal, namely the issuing of licenses to generic manufacturers of
antiretroviral drugs. It has been a particularly difficult case and we are
happy that the matter has been amicably resolved.=94
Simelane said the Commission had not asked for the imposition of a fine or
an administrative penalty.
=93We think it is far more important to have broadened access to cheaper
ARVs for people with HIV/AIDS through price reductions by generic
manufacturers. The introduction of generic substitutes should result in a
drastic reduction in the prices of antiretroviral drugs.
=93As the agreements provide for more than one generic manufacturer, there
will be competition amongst them, which should push prices even lower.
GSK will be making financial sacrifices by licensing the ARVs to generic
manufacturers at a royalty rate of only 5%, for both the public and
private sector. GSK has also reduced Aspen Pharmacare=92s royalty by 25% an=
d
it will retain all the royalties at the same 5%.=94
In terms of the settlement agreement GSK has undertaken to:
-         extend the voluntary licence granted to Aspen Pharmacare in
October 2001 in respect of the public sector to include the private
sector;
-         grant up to three more voluntary licences on terms no less
favourable than those granted to Aspen Pharmacare, based on reasonable
criteria  which include registration with the Medicines Control Council
and the meeting of safety and efficacy obligations;
-         permit the licensees to export the relevant antiretroviral drugs
to sub-Saharan African countries;
-         where the licensee does not have manufacturing capability in
South Africa , GSK will  permit the importation of the drugs for
distribution in South Africa ;
-         permit licensees to combine the relevant ARV with other
antiretroviral medicines; and
-         charge royalties of no more than 5% of the net sales of the
relevant ARVs.
ISSUED BY COMPLIANCE

Information may be obtained from:

Karin Coode
Head of Communication

Tel: (012) 482-9079
Cell: 083 357 1039
Fax: (012) 482-9120

MEDIA RELEASE FROM THE COMPETITION COMMISSION

16 October 2003

Competition Commission finds pharmaceutical firms in contravention of the
Competition Act

The Competition Commission has found that pharmaceutical firms
GlaxoSmithKline South Africa (Pty) Ltd (GSK) and Boehringer Ingelheim (BI)
have contravened the Competition Act of 1998. The firms have been found to
have abused their dominant positions in their respective anti-retroviral
(ARV) markets.

In particular the Commission has found the firms have engaged in the
following restrictive practices:

1.      Denied a competitor access to an essential facility
2.      Excessive pricing
3.      Engaged in an exclusionary act

The Commission has decided to refer the matter to the Competition Tribunal
for determination.

Menzi Simelane, Commissioner at the Competition Commission, says," Our
investigation revealed that each of the firms has refused to license their
patents to generic manufacturers in return for a reasonable royalty. We
believe that this is feasible and that consumers will benefit from cheaper
generic versions of the drugs concerned. We further believe that granting
licenses would provide for competition between firms and their generic
competitors."

"We will request the Tribunal to make an order authorising any person to
exploit the patents to market generic versions of the respondents patented
medicines or fixed dose combinations that require these patents, in return
for the payment of a reasonable royalty. In addition, we will recommend a
penalty of 10% of the annual turnover of the respondents' ARVs in South
Africa for each year that they are found to have violated the Act."

Simelane said these practices violate the Competition Act of 1998's
prohibitions against excessive pricing (section 8(a)), refusing access to
essential facilities (section 8(b)) and exclusionary acts that have an
anticompetitive effect that outweighs technological, efficiency or other
pro-competitive gains (section 8(c).

"Indeed the very goals of our Competition Act - promoting development,
providing consumers with competitive prices and product choices, advancing
social and economic welfare and correcting structural imbalances =96 have
been made difficult in this context by the refusal of the respondents to
license patents."

The original complaint in this matter was filed by Hazel Tau and others
alleging that GSK and BI were charging excessive prices to the detriment
of consumers for their patented ARV medicines.

GSK and BI hold patents on certain antiretroviral (ARV) medications used
to treat HIV/AIDS.  GSK holds patents in South Africa on AZT (branded as
Retrovir), Lamivudine (branded as 3TC) and AZT/Lamivudine (branded as
Combivir).  BI holds patents in South Africa on Nevirapine (NVP) (branded
as Viramune).

ENDS

Prepared by:    Beachhead Media & Investor Relations

Dani Cohen 021 469 9000 / 082 897 0443

Jennifer Cohen 011 214 2400 /082 468 646

On behalf of:   The Competition Commission

Further info:   Zolile Ntukwana

                Manager, Compliance Division at the Competition Commission

                082 774 6017