A dispute has erupted within the pharmaceutical industry over how to respond to a government proposal in South Africa to allow local manufacturers to copy brand-name drugs and sell them in the country at a lower cost.
The proposed policy would mirror a strategy already in place in India, which in the past two years has weakened patent protection on Novartis AG’s Gleevec and Bayer AG (BAYN)’s Nexavar cancer treatments.
The issue has put South Africa at the epicenter of a new battle over intellectual property, and opened divisions within the industry over how best to fight back. While drugmakers agree the challenge to their patent rights would hurt them financially, they have split over how best to push back.
“South Africa is now ground zero for the debate on the value of strong IP protection,” according to a plan drawn up by a U.S-based consultant to the Innovative Pharmaceutical Association South Africa, an industry trade group. “If the battle is lost here, the effects will resonate” in countries such as India and Brazil.
The renewed battles on IP echo a controversy more than a decade ago when drugmakers including London-based GlaxoSmithKline Plc (GSK) were attacked for charging high prices on HIV drugs in South Africa and elsewhere at the height of the AIDS epidemic.
The “excessive insistence” on intellectual property protection at that time was “the global low point” in the effort to spread free trade, said Lawrence Summers, president emeritus of Harvard University and a former U.S. treasury secretary, who was chairman of the Lancet medical journal’s commission on investing in health.
Drugmakers say that protection of intellectual property is needed to help fund development of new products and limit the export of generics to countries where patents remain valid. The companies, though, disagree about the best response to the South African government’s plan.
After the trade group considered a public relations campaign to spend $450,000 to oppose the government proposal, Novo Nordisk A/S (NOVOB) quit the organization citing a disagreement on the campaign, “which we felt did not serve our or the industry’s interests,” said Shelley Harris, a company spokeswoman.
Roche Holding AG (ROG) is considering following Novo’s lead and withdrawing from the industry group, said Daniel O’Day, who leads the company’s pharmaceutical unit.
“We don’t subscribe to that position,” O’Day said in an interview at Roche’s headquarters in Basel, Switzerland, referring to the proposed campaign.
Merck & Co. (MRK:US)’s MSD Southern & East Africa unit was involved in soliciting proposals from consulting firms and gaining support for the selected campaign.
In an e-mail describing the proposed campaign, Michael Azrak, managing director for the MSD unit, urged other companies in the association to “please discuss and gain agreement from your above country/global headquarters on our planned approach.”
“We can’t afford to wait until February to get this campaign moving,” Azrak wrote in the e-mail, which was obtained and distributed by Doctors Without Borders. Kelley Dougherty, a spokeswoman for Whitehouse Station, New Jersey-based Merck, confirmed that Azrak had written the e-mail.
The campaign sought to delay the adoption of the changes in intellectual property policy until after South Africa’s elections later this year, giving the industry time to better protect its patents. That delay would prevent South Africans from getting earlier access to affordable medicines, endangering their lives, said South African Health Minister Aaron Motsoaledi.
In an interview, Motsoaledi called the public-relations campaign a conspiracy of “satanic magnitude” and “a plan for genocide.” The comments were reported by the Mail & Guardian newspaper and confirmed by Motsoaledi’s spokesman.
The industry group explored the plan and eventually rejected it, said Val Beaumont, chief operating officer for Innovative Pharmaceutical Association South Africa.
“Our members have asked us to focus on trying to engage with government,” Beaumont said in a phone interview. “We haven’t paid attention to any other proposals.”
The industry group has submitted written comments on the policy to the Department of Trade and Industry, asking for clarity on how the new policy would work with existing legislation on voluntary and compulsory licensing.
Pfizer Inc. (PFE:US), based in New York, said it stands behind IPASA’s statement on the matter. Bristol-Myers Squibb Co., also based in New York, declined to comment.
While MSD supports IPASA’s decision to reject the proposal, it’s important to have a “national discussion” on intellectual property, Dougherty said in an e-mail.
Novartis (NOVN), like Roche based in Basel, said it wasn’t involved with the drafting of the campaign document and didn’t support it. The company wants to discuss with the government how to improve access to treatments while keeping South Africa “an attractive environment for innovation and investment,” the Swiss drugmaker said.
Intellectual property is resurfacing as a battleground as the pharmaceutical industry faces growing pressures. The high price of health care in the U.S. has spurred a new emphasis on cost-cutting at a time when blockbuster products are being replaced by new medicines targeting niche patient groups.
“The industry really wants to make sure people get access to medicines,” said Stephen Whitehead, chief executive of the Association of the British Pharmaceutical Industry, which represents 150 global companies operating in the U.K. “But the solution to that is not to undermine the whole IP model that this industry is reliant upon for investment in research and development.”
In India, a government-appointed panel is preparing to review more than 20 drugs in therapy areas such as HIV and diabetes, with plans to recommend about three so-called compulsory licenses for producing cheaper versions, Bloomberg News reported last week.
Last year, India’s Supreme Court denied Novartis’s request for patent protection for Gleevec, ending the company’s objection to regulatory rulings dating to 2006. A year earlier, a compulsory license was issued for making copies of Bayer’s Nexavar, a decision the Leverkusen, Germany-based company opposed as a violation of its patent rights.
Drugmakers also are trying to head off further compulsory licensing in other countries. One effort is to include a provision in the Trans-Pacific Partnership free trade agreement that would make policy in some participating countries more like that of the U.S. The nations drafting the partnership are the U.S., Japan, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
The proposed provision would strengthen patent protections for brand-name drugs and prevent generic-drug makers from selling products before patents expire, according to patent specialists who reviewed a draft document released by the WikiLeaks anti-secrecy group.
Pharmaceutical Research and Manufacturers of America, the U.S. drug trade group, is helping companies push for adoption of the provision. If adopted, it would effectively block generic competition and keep medicines unaffordable for large populations in the member countries, according to Doctors Without Borders, an independent humanitarian group. The agreement would roll back countries’ flexibility in dealing with public-health crises through such means as compulsory licensing as stated in the Doha Declaration of 2001, according to the nonprofit organization.
“The U.S. government is being led by the pharmaceutical companies to change the global norms on protection of intellectual property to obtain longer and stronger monopolies on their products,” said Judit Ruis Sanjuan, manager of the Access Campaign in New York at Doctors Without Borders.
U.S. President Barack Obama is seeking authority to fast-track the trade agreement and smooth congressional passage.
PhRMA says bolstering patent protection can help foster economic growth and medical innovation.
“Strong IP is responsible for advances in treatments for many diseases including HIV, cancer and heart disease that affect patients around the world,” Matt Bennett, the group’s senior vice president, said in a statement.
While drugmakers have lowered prices and invested in the health infrastructure of the poorest countries, 75 percent of people living in poverty are in middle-income emerging markets, a population that is being increasingly neglected, Sanjuan said. Aggressive patent protection in those countries doesn’t help, she said.
“My hope is that there will be a continued evolution of pricing regimes so that a proper balance can be found” between incentives for research and improving access to medicines, Summers said.
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