New drug policy is patently high risk

An unprecedented and controversial overhaul of South Africa’s patent system – already in motion – promises either cheaper drugs and economic growth, or the collapse of a vital underpinning of industry. 

But whether their efforts succeed or fail in the long run, a motley not-quite alliance between the likes of Médecins Sans Frontières and bureaucrats in often forgotten corners of the department of trade and industry can all but start celebrating a victory over international pharmaceutical companies.

Barring an unlikely turn in a final battle in Parliament next year, those applying for patents in South Africa towards the end of 2015 will not face the largely rubber-stamp system of the past, but the kind of substantial search and examination of applications used by countries such as the United States and Japan.

The change is so fundamental that arguments are still raging about what the impact will be. Pharmaceutical companies, in particular, believe it will make innovation and investment avoid South Africa, and so will indirectly contribute to poverty. Civil society activists say it will prevent abuse and excesses by those companies, making life-saving drugs more accessible.

Although government policy has not yet been finalised and the matter is not even on Parliament’s schedule yet, technocrats are treating the change as a done deal.

“We need to build the capacity [to conduct substantial patent examinations],” Elena Zdravkova, the senior manager for patents and design at the Companies and Intellectual Property Commission, told a summit organised by the Treatment Action Campaign (TAC) in mid-October. “We decided to appoint people in April next year in anticipation [of the change]; we plan to have examiners ready to start as soon as [the legislative] amendments pass.”

The commission had already budgeted for a first tranche of 20 new staff and their training, Zdravkova said.

Patent examiners
Twenty patent examiners will find it difficult to make a dent in the about 7 000 patents granted by the commission every year, but the intention is not to scrutinise all applications right away.

“We are not going to implement extensive investigations in all areas,” Zdravkova said. “We are going to start in the critical areas.”

Confirming the worst suspicions of pharmaceutical companies, “priority areas” include inventions in mining and bioengineering, but new drugs are at the top of every list.

About 2 500 new patents were granted for pharmaceuticals every year, Zdravkova said, and “this area will be the first where substantive examination will be introduced”.

When the then trade and industry minister, Rob Davies, first published a draft policy on intellectual property in September 2013, which dealt with everything from agriculture to basic science, drug companies in particular believed they were being targeted. Their fears were not overblown – the draft policy used medicine as an example of the problems it sought to address throughout.

Extremely concerned about the implications, the local subsidiaries of drug companies planned to lobby extensively against the draft policy. In what would later become known as “Pharmagate”, the Mail & Guardian in January published details of a proposed lobbying campaign that Health Minister Aaron Motsoaledi described as a conspiracy of “satanic magnitude” and a “genocide”. 

The plan called for the creation of an apparently local “coalition” of organisations but actually controlled from Washington, to argue against weaker intellectual property protection and to introduce “independent” but vetted research and opinion into the public debate. The Innovative Phar-maceutical Association of South Africa, for which the Washington lobbyists Public Affairs Engagement drew up the plan, later denied it had any hand in its drafting or any intention to use it.

The association this week did not respond to questions, including whether it was involved in lobbying, and whether it would consider challenging the patent fait accompli

In January, Motsoaledi said the plan would amount to making lifesaving drugs too expensive for broad use in South Africa and was focused on changing public perception because there would be no swaying Cabinet on the issue.

“They are not hoping to influence government; they are hoping to influence society to turn against government,” he told the M&G at the time.

Trade and industry department officials were clearly not swayed by the arguments of pharmaceutical companies. The draft policy published last year received a large number of comment – a summary of the responses runs to more than 600 pages. And most of those comments were not complimentary about the course the government was plotting.

“Largely it was that people feel that the proposal around substantive search and examination should not even be pursued in South Africa because it is costly,” the trade and industry department’s deputy director general for consumer and corporate regulation, Zodwa Ntuli, told the TAC conference in mid-October. “That is one thing coming out more in the submissions that we received, that we should not even go there.”

‘Eating well’
Multinational pharmaceutical companies, “eating well” under the current system, put extreme pressure on the department not to implement patent reform, the department’s chief director of policy and legislation, MacDonald Netshitenzhe, said.

Instead of backing down, the department took its draft policy to a private consultancy for a “regulatory impact study”. That, Ntuli and Netshitenzhe said, was intended to “liquidate any opposition”, and had succeeded: it found the proposals to be “sound”.

The public comments on the draft policy have not been made public. Neither have the regulatory study or any changes to the draft policy that could flow from it. The Cabinet has yet to sign off on the final policy, which must then be drafted into amendments to legislation such as the Patents Act, which must be passed by Parliament before a new system can be implemented.

But bureaucrats and technocrats are so confident that none of these processes will be delayed that their major current concern is to find offices for the new patent examiners to be hired within the next six months.

Patent system fails innovators and facilitates exploitation

In discussions on pharmaceutical patents it is simply called “evergreening” – the tactic by which drug companies extend the patents on medicines likely to become available as cheaper generics.

In a depository patent system, which South Africa has, these tactics often succeed. But if this was replaced with a substantial examination system to determine whether a “new” drug really is new, they should fail.

“The assertions that innovative firms, and particularly brand- name pharmaceutical companies, have engaged in evergreening practices have inspired discussion on the current IP [intellectual property] policy,” said the science and technology director general, Phil Mjwara. “The [draft] intellectual property policy speaks to evergreening effectively extending the term of exclusivity and impeding the introduction of generic medications and having a negative effect upon public health.”

Although the treatment of copyrights and trademarks is also addressed in the new policy, public health is at its core and is its primary justification. Substantial examination is expensive, but so are workdays lost by people suffering diseases that could be managed or cured if the correct drugs were available and affordable.

But there are broader political arguments for spending the money to create an examining system for patent applications. At the moment, South Africa was patenting “nonsense”, said Professor Anastassios Pouris, the director of the Institute for Technological Innovation at the University of Pretoria. “If you protect [through patenting] any nonsense, you make it impossible for the real inventors to progress … [Large companies] try to patent almost everything that it is possible to patent so the competition cannot enter the arena.”

Pouris said: “[Currently] 80% of the patents [in South Africa] are awarded to foreigners, and only 20% to locals. Abroad, it is the exact opposite.”

In his article, “Patents and Economic Development in South Africa”, published in the South African Journal of Science in 2011, Pouris and his co-author write: “The current intellectual property rights regime not only fails to support the objectives of the national system of innovation but also … facilitates exploitation by foreign interests and creates substantial social costs.”

But the poor implementation of a good patent system could do more harm than good. David Cochrane, a patent attorney at Spoor & Fisher, said, although an examining patent system could benefit the country’s economy and innovation system, “the biggest risk … is whether [we have] the capacity and the ability to implement [it]”.

“A patent examination system will require graduates who have engineering and science degrees and these graduates will have to undergo expert training to become patent examiners. If there are not enough patent examiners, or if they are not properly trained, this could lead to bad patent examinations and delays, which could lead to long delays before patents are granted and the whole patent system could fall apart,” he said. 

Evergreening alive and well

Since a bruising legal (and public relations) battle with the South African government in the late 1990s, pharmaceutical companies have tread lightly around medicines that treat life-threatening diseases such as HIV and Aids, TB and malaria.

But evergreening is alive and well in supposedly safer areas and they see the effects of it every day, say medical practitioners.

“If you are not on the ground, you don’t really understand,” HIV clinician Sindi van Zyl told a conference on intellectual property reform in mid-October.

Van Zyl’s present favourite example is the popular birth-control pills Yasmin and Yaz (Yaz being a newer version of Yasmin, with less synthetic oestrogen), and its currently unavailable generic equivalent Ruby.

Local generic manufacturer Pharma Dynamics registered Ruby in 2011 as a generic version of Yasmin, on which the patent had indisputably expired. Ruby would have been an estimated one-third cheaper than Yasmin, which Van Zyl says would have had long-term ripple effects when it comes to unwanted pregnancy or HIV.

But the Supreme Court of Appeal ruled in late September that even though Yasmin dates back to 1990, Ruby still infringes a newer Bayer patent based on how the body absorbs the drug. This, the court held, was sufficient to extend the legal, state-enforced protection Bayer had enjoyed for 20 years under the South African patent regime.

In Europe and the US, by contrast, where substantive examinations of patent claims are made, authorities have held that the new patent claims made by Bayer are invalid for a lack of inventiveness and generics of Yasmin are available.

“This means that while generics are available in the markets where most of the initial investment in drug research and development was made [the US and Europe], countries like South Africa will continue to pay high prices for another decade,” Médecins Sans Frontières said in an analysis of the impact of the court case.

By some estimates, more than three-quarters of pharmaceutical patents granted in South Africa would fail a test for inventiveness if properly examined. – Phillip de Wet

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Phillip De Wet
Guest Author

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