Intellectual property rights (IPRs) standards are improving in most countries across the globe; but South Africa seems to be bucking the trend according to proposed new laws and regulations. When it comes to international investment, we must recognise that the decision whether to invest in a foreign country is a complex one based on a variety of factors such as energy availability, labour laws, impartial courts, size of the domestic market etc. While a robust and effective IPR regime would not be sufficient in and of itself to attract foreign direct investment to our shores, a weak or poorly enforced IPR regime will deter innovative companies from investing here.
According to the latest Biopharmaceutical Competitiveness and Investment Survey (BCI), a cross-country tool developed for evaluating the sector based on an opinion survey of business executives and local general managers from the biopharmaceutical industry, South Africa ranks poorly compared to other countries when it comes to bio-medical investment attractiveness.
South Africa scores particularly badly in the categories that measure “The Regulatory System” and “Effective Intellectual Property Protections”. The BCI cites government’s current review of the intellectual property rights (IPRs) system as proposed in the Draft Intellectual Property Policy paper (Draft IP Policy). The executives surveyed are concerned about the extent to which the proposed changes will undermine innovation and are wary of investing in the country.
The outcome of this erosion of IPRs is entirely predictable – South Africa’s citizens will experience a material decline in their overall health and wellbeing. South African citizens need to make a concerted effort and demand that South Africa’s property rights regime is strengthened, not diminished, if we are to attract foreign direct investment and if ordinary South African citizens want to have the confidence that any property they acquire (both tangible and intangible) will be protected. For South Africa to continue experiencing economic and health gains, the maintenance of IPRs protection is vitally important.
To resolve the problems of a lack of investment in the pharmaceutical sector and a lack of access to pharmaceutical products, does not require a desperate search for extraneous and trendy “solutions”, but to stop choking off the investment and to use scarce resources in the most efficient manner possible. For example, the BCI cites, “Long drug approval delays of at least five years… [and] inadequate regulatory capacity, notably with regard to complex drugs”. But many of these drugs have already been approved by advanced country regulators. The slow approval procedures they must again go through in South Africa effectively eat into the patent life of the drug, which reduces its commercial viability, deters investment and discourages companies from registering drugs in our country.
The tardy procedural process denies consumers timely access to new and innovative drugs that have the potential to substantially improve health outcomes. For example, I am aware of a pharmaceutical company that had an HIV medicine approved by the FDA in 2006, which, even though it was considered one of the most innovative medicines in 2006, was only approved by South Africa’s MCC five years later. How much unnecessary suffering, possible mortality, and hospital and other costs could have been avoided had this medicine and others like it been available sooner?
If the DTI’s Draft IP Policy is translated into law, the resulting abrogation of patent rights will become a further major barrier to investment in South Africa, especially so for the innovator pharmaceutical companies whose new medicines provide the product pipeline on which all generics manufacturers depend. In addition, undermining patent rights will do nothing to overcome the other factors that make it difficult for South African manufacturers to compete internationally, such as electricity shortages, poor skills and productivity, prolonged and often violent strikes, inadequate transport logistics, and high input costs of various kinds.
Rather than trying to make it easier to expropriate property and thwart innovation, policy makers should enact reforms that will improve access to medicines. The Draft IP Policy takes South Africa in the wrong direction. Robust IP protections will foster local innovation and attract committed investors who can drive South Africa’s economic growth and human development long into the future. Without them, we will never make the transition from a resource-based economy to one based on knowledge and ideas.
Jasson Urbach is director at the Free Market Foundation