Virtually every product that we come into contact with on a daily basis has some form of intellectual property (IP) attached to it. According to the International Property Rights Index, South Africa’s observance of these rights has meant that its score in this area for many years has been a good one. Contrary to such an encouraging signal that the country is on the right track, the Department of Trade and Industry (dti) seeks to make sweeping changes to South Africa’s existing patent laws.
Draft national policy on intellectual property rights
In September 2013, the dti published The Draft National Policy on Intellectual Property (Draft Policy) containing the amendments to our existing legislation that it is putting forward. Inordinate attention is focussed on the IP governing pharmaceutical products. The legislation the dti proposes will make it more difficult to obtain patents on pharmaceutical products and easier to ‘break’ them when granted. If this law is enacted it will be disastrous not only for all sectors that rely on the robust protection of property rights, but especially on the pharmaceutical sector and the millions of patients who rely on innovative new drugs.
The Draft Policy’s unfortunate focus on pharmaceutical products diverts attention from basic healthcare issues. For us to have a healthy nation with the necessary manpower and energy to grow the economy, government needs to eliminate the barriers that impede access to essential, already proven, off-patent medicines.
SA must not join the ‘losers’
Countries characterised as ‘winners’ have strong IP rights. To lower South Africa’s IP rights standards would be tantamount to relegating its citizens to the levels that characterise ‘loser’ countries. If we stop respecting the IP rights of international investors, they will simply take their money and expertise elsewhere. To them, South Africa is not a special case. A cornerstone of the international agreement that governs IP, to which South Africa is a signatory, is the issue of national treatment. The principle effectively states that the South African government cannot discriminate against foreigners. If South Africa limits IP rights, it will limit the IP rights protection of its own citizens.
It takes more than a decade and millions of dollars to bring a new drug to market. It involves thousands of people who are not only directly involved with a company – which already covers a broad spectrum of individuals - but also the myriad people outside that company involved in the multitude of activities required to successfully take a drug from compound to pharmacy shelf. Millions of people are dependent on originator drug companies either for the jobs they provide or for the products they sell. In short, we cannot live the lives to which we have become accustomed in the 21st century without innovative drug companies.
Innovative pharmaceutical drugs also form the life-blood of the generic drug pipeline. Without innovative medicines there can be no generics. Intellectual property rights provide the necessary window of opportunity for innovative drug companies to earn a return on the substantial investment required in the production of a new drug. The window of opportunity governments grant innovator companies exclusive rights to market and sell their drugs usually lasts 20 years. Often it is a shorter period due to regulatory delays.
Functions and responsibilities of drug regulators
South Africa’s drug regulator, the Medicines Control Council (MCC), was recently accused of delaying the entry of generic drugs onto the market to allow innovative companies to continue marketing their drugs without competition. These allegations are unwarranted and inappropriate. The MCC may have many faults – the chief being its extremely tardy approval process – but they are not corrupt. Moreover, innovative manufacturers of brand-name drugs have an incentive to ensure that the MCC is as efficient as possible because these delays eat into their patent life and thus reduce the commercial value of their product.
Across the globe, manufacturers of innovative medicines are working with policy-makers and drug regulators to streamline and harmonise regulatory reviews. This would reduce unnecessary delays and costs and improve patient access to new discoveries. So why would these same companies who bear all the risk over many years of investing in the development of new medicines suddenly support delays in approving products? It is obscene to suggest that the reason why a competitor is experiencing delays with a bureaucratic institution that has a poor drug approval track record (for both originator and generic drugs) is because innovative companies that rely on a 20 year period of patent protections are influencing the drug regulators to do this on their behalf. If they were to do this, it would be a case of cutting off their nose to spite their face.
Innovative pharmaceutical manufacturers have for many years been urging the MCC to reform to bring down approval times from the current average of approximately 37 months for new drugs (with significant variation with some drugs still waiting for approval after 14 years) and 34 months for generics to the more internationally acceptable time of six to twelve months. Both commercial and compassionate reasons exist for improving the approval timelines.
Pharmaceutical companies start earning revenue and patients can access drugs only after they have been approved. Some drugs have been available for between three to six years in over 40 countries but are still not available in South Africa. Why does the MCC refuse to grant marketing approval for drugs that have been approved and closely monitored by advanced country regulators? Why should drugs that have been available for years in other countries without any adverse incidents still be denied to patients in South Africa?
Taking intellectual property
If government introduces the changes contained in the Draft Policy, it will create a situation where the virtuous are extolled as evil and give rise to government sanctioned theft of property. If South Africa goes down this road, not only will foreign investment in our country dry up but our own innovators who seek to earn a return on their investments both domestically and internationally will be adversely affected. Moreover, it will send a message to every South African that theft of property in the name of the ‘public interest’ is acceptable. When law and morality contradict one another, South Africans will either cease to respect the rule of law or, alternatively, fail to recognise the difference between right and wrong. Most people view law and justice as one and the same thing. If a law makes it legal to steal, then it also becomes legitimate. If enacted, the Draft Policy will be the thin edge of the wedge.
Today, pharmaceutical companies are the main target of government policy. Tomorrow it could be the food in supermarkets, the clothing in chain stores, or the houses that we live in, all in the name of the ‘public interest’.
Alternatives to coercion
As an alternative to coercive measures, government and civil society organisations should consider entering into mutually agreeable collaborations as opposed to one forcing the other into a sale or to forfeit their property. Pharmaceutical companies, just like all enterprises, are willing to negotiate, for example, to offer a reduction in price if the purchaser agrees to buy a specified volume. Curiously, in South Africa, legislation that prevents private actors from entering into mutually agreeable contracts allows government to enter into price negotiations with pharmaceutical companies.
Here are three ways government can increase access to medicines in the short-run: reforming the way the drug regulator approves medicines, removing VAT on medicines, and allowing private actors to enter into price negotiations with pharmaceutical manufacturers. These simple policy solutions should receive wide-spread support from all quarters, especially from patients who are being denied necessary and effective drugs.
Ultimately, it is economic development that will be the major driving factor behind increased access to medicines. South Africa needs to follow the example set by the rest of the world. It needs to adopt policies that characterise rich nations which include respect for the rule of law and a sound property rights regime. History has repeatedly demonstrated – wealthier nations are healthier nations.
Author Jasson Urbach is an Economist and director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author's and are not necessarily shared by the members of the Foundation.