Competition Commission Settlement Agreements Secure Access to Affordable Life-Saving Antiretroviral Medicines


TAC Newsletter - 10 December 2003, 11h00 SA time (GMT plus 2)

Contents



Editor's Note: Today, International Human Rights Day, is TAC's 5th Birthday!

A Victory for People living with HIV/AIDS and for public health!

 

Affordable medicines for millions of sub-Saharan Africans are much closer after landmark agreements were concluded and signed yesterday between pharmaceutical companies and AIDS activists.

The Treatment Action Campaign (TAC), COSATU, CEPPWAWU, the AIDS Consortium, four people living with HIV/AIDS and four health-care workers have entered into settlement agreements with pharmaceutical giants GlaxoSmithKline (GSK) and Boehringer Ingelheim (BI).  In signing these agreements, AIDS activists have now concluded their complaint against GSK and BI.  The terms of the agreements go well beyond what could conceivably have been won by pursuing the prosecution of the complaint under the Competition Act.

The effect of the agreements with GSK and BI is that the Clinton Foundation deal that was announced on 23 October 2003 can be implemented in South Africa and other sub-Saharan African countries immediately.  The Clinton Foundation deal has ensured that four generic companies will sell triple-drug antiretroviral therapy to governments in sub-Saharan Africa at US $140 per patient per year.

The terms of the agreements are:

1.GSK will grant licences to four generic companies (including Aspen Pharmacare and Thembalami Pharmaceuticals) to produce and/or import, sell and distribute the antiretroviral medicines AZT and lamivudine.  Before the agreement with GSK was concluded and signed, GSK had only granted a licence to Aspen Pharmacare.

2.BI will grant licences to three generic companies (including Aspen Pharmacare) to produce and/or import, sell and distribute the antiretroviral medicine, nevirapine.  Before the agreement with BI was concluded and signed, BI had only granted a licence to Aspen Pharmacare.

3.The royalty fee on the licences will be no more than 5% of net sales of the antiretroviral medicines.  Before the agreements with GSK and BI were concluded and signed the royalty fee that GSK requested was 30% and with BI it was 15%.

4.The licences will be for both the private and public sectors.  Before the agreements with GSK and BI were concluded and signed the licences granted by GSK and BI to Aspen were limited to the public sector only.

5.The agreements with GSK and BI will also allow licensees to export AZT, lamivudine and nevirapine that are manufactured in South Africa to all 47 sub-Saharan African countries.  Before the agreements with GSK and BI were concluded and signed, exports to sub-Saharan African countries were not permitted.  

6.The licensees will be able to manufacture AZT, lamivudine and/or nevirapine in combination with each other and/or any other medicines for which the licensees have licences.  This is critical because it will allow triple-drug fixed dose combinations, currently manufactured by at least two generic producers, to come to the market.

7.The licences apply to both adult and paediatric formulations of AZT, lamivudine and nevirapine.

Generic companies should therefore apply for regulatory approval (where such approval has not as yet been obtained) for their versions of AZT, lamivudine and nevirapine, as well as fixed dose combinations that contain any or all of these antiretrovirals.  They should also immediately apply to both GSK and BI in order to obtain voluntary licences as contemplated in the agreements concluded and signed with GSK and BI.

The agreements are legally binding on GSK and BI.  In the event that GSK and/or BI do not comply with any aspect of any agreement it will be left open to the complainants to go to a court of law to enforce any aspect of the agreement that is not being complied with.

TAC will monitor the prices of generic medicines as vigilantly as it monitors the prices of brand-name medicines.  We call on the generic companies such as Aspen Pharmacare and Thembalami Pharmaceuticals to commit to making generic medicines affordable for the majority of people living with HIV/AIDS in sub-Saharan Africa.

TAC also calls on pharmaceutical companies such as Merck, Roche and Abbot to follow the examples of GSK, BI and Bristol Myers Squibb by agreeing either not to enforce their patents on antiretroviral medicines in sub-Saharan Africa or by granting voluntary licences to generic manufacturers on reasonable terms.

Today is also International Human Rights Day and the fifth anniversary of the Treatment Action Campaign.  We remember the countless lives lost because of patent abuse and government neglect but this deal and our government's treatment plan allows all of us to work together on saving lives and preventing new infections.  

TAC wants to thank Advocate Robert Petersen SC, Advocate Susannah Cowen, and the AIDS Law Project's Law and Treatment Access Unit, in particular Jonathan Berger and Fatima Hassan, Alison Dyer and Geoff Budlender for their assistance. We also want to thank Advocate Hamilton Maenetje for his work. Thanks also to the experts who wrote affidavits for the complaint including Robin Wood, James Love, Rob Dorrington, Leon Regensberg, Marc Cotton and Alex Van Den Heever.

The complainants were Hazel Tau, Nontsikelelo Zwedala, Sindiswa Godwana, Isaac Skosana, Sue Roberts, Steve Andrews, Francois Venter, COSATU, CEPPWAWU and the TAC. They were later joined by the AIDS Consortium and a policeman who subsequently died of AIDS.

A document entitled "Fact Sheet" explaining the terms of the agreements entered into is attached to this press statement.  

For more information please contact:
Fatima Hassan 083 279 9962 (021 422 2186)
Jonathan Berger 083 419 5779 (011 717 8627)

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NEWS RELEASE FROM THE COMPETITION COMMISSION

Competition Commission concludes an agreement with pharmaceutical firms

 
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's 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.

 

"The 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."

 

Simelane said the Commission had not asked for the imposition of a fine or an administrative penalty.

 

"We 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.

 

"As 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's royalty by 25% and it will retain all the royalties at the same 5%."

 

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.

 

ENDS

Prepared by:    Beachhead Media & Investor Relations

Dani Cohen 021 469 9000 / 082 897 0443

Jennifer Cohen 011 214 2400 /082 468 6469

 

On behalf of:   The Competition Commission

 

Further info:    Karin Coode, Head of Communications

                        012 482 9079 / 083 357 1039 / karinc@compcom.co.za

 

                        The Treatment Action Campaign

                        Fatima Hassan 083 2799962/083 419 5779

                        Jonathan Berger 083 419 5779

 

                        Cosatu

                        Willy Madisha 082 783 2967

 

                        CEPPWAWU

                        Welile Nolingo 082 375 5586


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AIDS Consortium jubilant over Competition Commission complaint settlement!


On behalf of its members and many people living with HIV the AIDS Consortium welcomes the settlement in the Competition Commission complaint between Tau and Others vs GlaxoSmithKline and Boehringer Ingelheim. We congratulate the  legal team, and negotiators from the Treatment Action Campaign and the AIDS Law Project who have been working on this case.

The AIDS Consortium was one of the complainants and Hazel Tau, the first complainant, is an executive committee member of the AIDS Consortium. In a year, which saw cabinet announce its plans to roll out of ARVs in the public health sector, ending 2003 on this note could not get better.

The settlement will mean that millions of people should soon be able to access cheaper treatment and be able to comply with their drug regime simply because the drugs are more affordable. Something they just could not do with the excessive pricing that was being charged for AZT, 3TC and Nevirpaine brand drugs.

This settlement means that people in the rest of Africa will also benefit and the fact that the agreement is not confined to sales in the public health sector but includes the private health sector is indeed historic.

We call on other drug companies to do the same and issue voluntary licences for essential life saving drugs, because this will enable governments in developing countries to provide treatment for all people living with HIV and AIDS in a sustainable manner and invest money to improve health care facilities and employ more health care workers.

The Consortium will be present to witness this ground-breaking settlement and has closed its offices for today to celebrate.
For more information please contact

Sharon Ekambaram
Advocacy Officer
AIDS Consortium -083 6348924


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TAC/ALP FACT SHEET


SETTLEMENT AGREEMENTS REACHED IN HAZEL TAU AND OTHERS v GLAXOSMITHKLINE (GSK) AND BOEHRINGER INGELHEIM (BI)


Background

On September 19th 2002, the AIDS Law Project lodged a complaint with the Competition Commission against GlaxoSmithKline (GSK) and Boehringer Ingelheim (BI) on behalf of four people living openly with HIV/AIDS, four health care workers, the Treatment Action Campaign (TAC), and COSATU and its affiliate CEPPWAWU.  In February 2003, two further complainants joined-a police officer living openly with HIV/AIDS (who subsequently passed away on June 16th 2003) and the AIDS Consortium (representing more than a thousand individual and organisational members).

Alleging that the two multinational pharmaceutical groups were acting unlawfully by charging excessive prices for certain of their antiretroviral medicines (ARVs) to the detriment of consumers, the complaint argued that the prices charged by the groups for their essential and life saving medicines are directly responsible for the premature, predictable and avoidable deaths of women, men and children living with HIV/AIDS.  The complaint showed that even when allowance is made for the costs of research and development, higher profits, licensing fees and the incentive to develop new drugs, the prices of these ARVs were excessive.

On October 16th 2003, the Competition Commission announced that it had decided to refer the complaint to the Competition Tribunal for adjudication.  As a result of its year-long investigation, the Competition Commission found evidence to support the referral on the basis of prohibited excessive pricing as well as two additional grounds, both of which deal with the failure of GSK and BI to license generic manufacturers in certain circumstances.  GSK and BI were using their patent monopolies to deny appropriate licences to other manufacturers while keeping their own prices high.

What were the prices of the ARVS at the time the complaint was lodged in 2002?

The ex-manufacturer private sector prices of the relevant ARVs (excluding VAT) for a month's supply were as follows:

The prices for paediatric formulations were as follows:

ARVs should be given as a cocktail of at least three drugs (such as AZT, lamivudine and nevirapine).  This is also known as highly active antiretroviral therapy, or HAART.

What licences had been granted at the time the complaint was lodged?

Aspen Pharmacare, a South African generic pharmaceutical company, was already licensed by GSK to manufacture and sell AZT and lamivudine products in South Africa to the government, NGOs and employers who treat their workers who do not belong to medical schemes.  Such sales were subject to a 30% licensing (or royalty) fee.

Aspen obtained a similar licence from BI to manufacture and sell nevirapine in South Africa to the government, NGOs and employers who treat their workers who do not belong to medical schemes.  It is understood that such sales were initially subject to a 15% licensing (or royalty) fee. As with the GSK licence, this licence did not entitle Aspen to sell to the private sector.  It is unclear whether Aspen was permitted to export even to Southern African Development Community (SADC) countries.

Why was a single license from GSK and BI to Aspen not enough?

There are five key reasons why the licences given to Aspen by GSK and BI did not solve the problem of ensuring access to a sustainable supply of affordable ARVs.

First, more licensees are needed to ensure that there is proper competition among generic drug companies.  Proper competition will ensure that the prices of ARVs reach their lowest possible amount and remain affordable.

Second, Aspen's AZT, lamivudine, AZT/lamivudine combination and nevirapine are not yet registered by South Africa's Medicines Control Council (MCC) and therefore cannot yet be used in South Africa.  Other generic companies' ARV products are already registered by the MCC.  But GSK and BI would not allow such products to be sold in South Africa and other countries where their patents apply.

Third, at least two generic companies produce a single pill that contains three different ARVs.  This is very important because patients can take this single pill twice a day instead of having to take many pills twice a day.  Such fixed-dose combination ARVs have been shown to improve adherence to treatment regimens and ultimately improve patient health.

However, since all the ARVs that are combined in the pill (stavudine, lamivudine and nevirapine) are patented in South Africa, the generic companies cannot legally sell the combination pill in South Africa unless they get licences from the patent holders to do so.
So far, Bristol Myers-Squibb has agreed that it will not enforce its rights in its patented ARVs, one of which is d4T.  Without GSK doing the same (or granting licences to generic companies) for lamivudine, and BI doing the same for nevirapine, the combination pill cannot be sold in South Africa.

In addition, at least one generic company produces another pill that contains a different combination of three ARVs (AZT, lamivudine and nevirapine).  But it cannot sell this important combination pill in South Africa until it gets licences to do so.

Fourth, the GSK licence to Aspen did not allow for exports, with the BI licence possibly allowing for limited exports only.  It is important to note that HIV/AIDS affects all countries - it does not respect national borders.  Solving the issues of access in South Africa without addressing similar issues in all other sub-Saharan African countries is both problematic and immoral.  In addition, local generic manufacturers must have economies of scale if they are to be able to offer and sell at prices that are competitive.

Finally, excluding the private sector from these licences is problematic for the following reasons:


What do the settlement agreements with GSK and BI achieve?

The settlement agreements will open up the ARV market to generic competitors.  Including Aspen Pharmacare, four generic companies will be licensed to manufacture and/or import generic AZT and lamivudine products, with three companies being licensed to manufacture and/or import generic nevirapine products.  All licensees will be entitled to combine AZT, 3TC and nevirapine, both with each other and with other ARVs.  All licensees will be entitled to sell their products to both the public and private sectors, with sales being subject to a maximum 5% royalty rate.

While all licensees will be strongly encouraged to manufacture generic ARVs in South Africa in the interests of developing local pharmaceutical manufacturing capacity and job creation, they will nevertheless be entitled to use their licences to import if they decide not to or are unable to manufacture locally.  Licensees that manufacture the ARVs in South Africa will be entitled to export their products to all countries in sub-Saharan Africa.

What prices can we be expected to pay in the public and private sectors?

Government will now be free to procure ARVs from a range of generic manufacturers, without first having to issue compulsory licenses or negotiate voluntary licences.  In the public sector, the settlement agreements will open up access to the prices recently announced by the William J. Clinton Foundation, removing the last patent barriers to accessing AZT, lamivudine and/or nevirapine products.  For the standard first-line regimen of stavudine, lamivudine and nevirapine, for example, the Clinton Foundation price of US$140 per patient per year (± R75 per month) represents a 74% savings on the current best price of US$538 per patient per year (± R290 per month).

Based on the current international best price offers made by generic companies and at current exchange rates, we expect to see the same stavudine, lamivudine and nevirapine regimen costing in the range of US$200 - 250 per patient per year (± R110 - 140 per month), with the same regimen in a three-in-one fixed dose combination form costing in the range of US$250 - 290 per patient per year (± R140 - 160 per month).  The same regimen currently costs over R1000 per month.1

At current exchange rates, other ARVs are expected to cost consumers as follows:

Why have the complainants agreed to withdraw the complaint?

In return for the concessions made by GSK and BI in the settlement agreements, the complainants have agreed to formally withdraw the complaint.  This does not mean the complaint was unjustified.  It simply means that the public interest will be better served by securing these gains now, at least for South Africa and the whole of sub-Saharan Africa, through a negotiated settlement.

Although the complainants would have wanted GSK and BI to concede more, they concluded after lengthy negotiations that this is the best that can be achieved now.  It goes well beyond what could conceivably have been won by pursuing the prosecution of the complaint under the Competition Act.

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