Reducing the Prices of Antiretroviral Medicines

Answers to Frequently Asked Questions

27 October 2003

Introductory questions

1. What steps are activists currently taking to ensure the availability of affordable antiretroviral medicines (ARVs)?

In September 2002, a number of people and organisations filed a complaint against GlaxoSmithKline (GSK) and Boehringer Ingelheim (BI) at the Competition Commission. The complaint says that these companies are charging excessive prices for their antiretroviral medicines (ARVs) and that this is "directly responsible for the premature, predictable and avoidable deaths of people living with HIV/AIDS". GSK manufactures various adult and paediatric formulations of a number of ARVs, including AZT and lamivudine. BI manufactures nevirapine.

The people and organisations who lodged the complaint are: COSATU, TAC, CEPPWAWU, Hazel Tau, Nontsikelelo Zwedala, Sindiswa Godwana, Sue Roberts, Isaac Skosana, William Mmbara, Steve Andrews and Francois Venter. Two additional parties joined the complaint in February 2003, the AIDS Consortium and a TAC volunteer who subsequently died of an AIDS-related illness in June.

Details about the complaint can be found in the booklet called The Price of Life, available on the Internet at www.alp.org.za/view.php?file=/resctr/pubs/20030813_PriceCover.xml

In addition, a fact sheet on the Competition Commission complaint is available at:
http://www.tac.org.za/Documents/DrugCompaniesCC/QuestionsAndAnswers.pdf

Besides the complaint at the Competition Commission, the TAC Treatment Project and the Generic Anti-retroviral Procurement Project (GARPP) asked BI in September 2003 for voluntary licenses to import generic nevirapine. If BI does not grant these licenses, the two projects will apply to the Commissioner of Patents for compulsory licenses. Such licenses would allow them to import generic nevirapine, without BI's permission.

In addition, pressure is being put on the South African government to use its powers to make ARVs more affordable. A civil society submission has been handed to the National HIV and AIDS Treatment Task Team. This submission included a memorandum setting out the ways in which the state could use its powers. The memorandum also explains that the state is constitutionally obligated to use its powers to reduce medicine prices. The memorandum is available online at:
www.tac.org.za/Documents/ARVsubmissionAnnexures19Sept.doc

2. Why are GSK and BI being targeted when there are other companies manufacturing ARVs?

AZT, lamivudine and nevirapine are commonly used ARVs. They are often used as part of the same triple-drug regimen. TAC is focusing on GSK and BI for now because these two companies not only charge much higher prices than generic companies, but also vigorously enforce their patent rights in South Africa.

In the past, activists have put pressure on other drug companies. For example, Bristol Myers Squibb (BMS) responded to the pressure of activists by agreeing not to enforce its rights in two patented ARVs - didanosine (ddI) and stavudine (d4T). There are already two generic forms of d4T available on the market.

A campaign was also led against Pfizer to demand generic competition for fluconazole. This led to Pfizer making a donation of the drug to the government in South Africa and other developing countries.

3. What should the South African government be doing to bring down ARV prices?

The government should be asking all the ARV patent holders to issue voluntary licenses to generic manufacturers, both for importation and local production. If the drug companies fail to respond positively, government should issue compulsory licenses so that it (and the public) has access to the cheapest generic ARVs of proven quality, safety and efficacy.

4. Has Government made any progress in bringing medicine prices down?

There has been very little visible progress to date. The reason ARVs have come down from over R4 000 per month in 2001 to current prices of about R1 200 - R1 400 per month in the South African private sector is primarily as a result of the pressure that civil society groups have put on the pharmaceutical companies.

Questions about the Competition Commission case

5. What can the Competition Commission do?

The Competition Commission's job is to investigate complaints that it receives. If after this investigation the Commission finds that the complaint is valid, it announces its findings and refers the complaint to the Competition Tribunal. The Competition Tribunal is similar to a court. It considers all points of view about the complaint and then makes a ruling.

Important: The findings of the Competition Commission are not binding on anyone. It is the Competition Tribunal that makes decisions that are binding, just like a court.

6. What can be achieved if the Competition Tribunal rules against GSK and BI?

The complainants (the people and organisations who lodged the original complaint with the Competition Commission) have asked for the following actions to be taken against GSK and BI:

GSK and BI must be ordered to stop their excessive pricing practices;
GSK and BI must be fined up to 10% of their annual South African turnover; and
GSK and BI's conduct must be declared to be a prohibitive practice.

If this is done, people who suffered loss as a result of past excessive pricing of the ARVs can sue the companies for damages. For example: a person might be able to show that a family member died because she could not afford GSK and BI's ARVs but would have been able to afford it if a fair price had been charged. This person would then be entitled to claim compensation for any damage suffered.

7. The Competition Commission has decided to refer the complaint to the Competition Tribunal. What does this mean?

On 16 October 2003, the Competition Commission announced that they have decided to refer the complaint to the Competition Tribunal. They released a press statement stating that GSK and BI have contravened the Competition Act of 1998 by abusing their dominant positions in the market. The Commission found that GSK and BI have engaged in the following forms of prohibited conduct:

Excessive pricing to the detriment of consumers;
Denying a competitor access to an essential facility; and
Engaging in an exclusionary act.

The Commission's findings go beyond the original complaint. The initial complaint only asked the Commission to find that the drug companies had engaged in excessive pricing. The Commission has investigated the complaint and has found evidence to support the referral to the Competition Tribunal on these two additional grounds, both of which deal with the failure of GSK and BI to give licenses to generic manufacturers.

The Commission has decided to ask the Competition Tribunal to license generic competitors. By opening up the market to generic competition, the Tribunal would ensure that people in South Africa get access to a sustainable supply of affordable ARVs.

It is important to understand that these are merely findings of the Competition Commission after its yearlong investigation; they are not legal rulings. It is the role of the Competition Tribunal to make orders against GSK and BI if, after hearing argument and considering the evidence, it concludes that the Competition Commission's findings are correct.

Nevertheless, the Competition Commission findings are significant, as they will put pressure on GSK and BI to lower their prices and to give licenses to generic manufacturers. In the last two weeks this has already started to happen.

8. How have GSK and BI responded to the decision by the Competition Commission to refer the complaint to the Competition Tribunal?

BI's response has been unproductive. They have merely expressed confusion at the decision. There was some progress with BI when the complaint was initially lodged. BI responded by giving a license to a South African generic manufacturing company called Aspen Pharmacare. Aspen now has permission from BI to manufacture and sell nevirapine to the government, but not to pharmacies or medical schemes.

GSK's response has been significantly better, but still not good enough. They have also given Aspen licenses so that it can manufacture and sell AZT and lamivudine to government, NGOs and employers who treat their workers who do not belong to medical schemes.

On the same day that the Competition Commission announced it would refer the matter to the Tribunal, GSK extended its licensing agreement with Aspen. Now Aspen can sell their AZT and lamivudine products to the private sector and may also export these medicines to all countries in sub-Saharan Africa. In addition, GSK reduced its ARVs prices to the public sector, NGOs and companies providing medicines to their employees. However, their private sector prices remain excessive.

Of concern, however, is that neither GSK nor BI has yet allowed any other generic company to have a license to produce or import generic antiretrovirals. In addition, neither GSK nor BI has indicated that they are prepared to do so. This is a problem for three reasons:

More generic companies are urgently needed to ensure there is proper competition among drug companies. Only proper competition will ensure that drug prices reach their lowest possible amount and stay there.

At least two generic companies produce a single pill containing three ARVs. This is very important because patients can now take one pill twice a day instead of many pills. This has been shown to improve adherence to medicines and ultimately patient health. However, since all the ARVs that are in the pill (which happen to be d4T, lamivudine and nevirapine) are patented in South Africa, the generic companies cannot legally sell these medicines in South Africa unless they get licenses to do so. So far, BMS has agreed not to enforce its rights in its patented ARVs, one of which is d4T. But until GSK does the same (or grants licenses to generic companies) for lamivudine, and BI the same for nevirapine, this important combination ARV cannot be sold in South Africa.

At least one generic company produces another combination pill containing three ARVs (AZT, lamivudine and nevirapine). It cannot sell this important pill in South Africa until it gets a license to do so.

9. Why is the deal that BI signed with Aspen only applicable to the public sector and not the private sector?

BI (and previously GSK) argues that people in the private sector are able to afford higher prices than those offered to the public sector. This is wrong for a number of reasons:

First, many poor people, especially in rural areas, buy their medicines from doctors and pharmacies in the private sector.

Second, if more people can afford to buy the medicines in the private sector, they are less likely to use the public sector to get their ARVs. This can reduce the burden on the public sector.

Third, medical schemes are under financial pressure due to the HIV epidemic. If we are to ensure that they offer acceptable benefits to people with HIV and that more people are able to access medical scheme cover, then it is important to keep ARV prices as low as possible.

10. How long will the Competition Commission case continue?

The Competition Commission has until the end of November 2003 to file referral papers with the Competition Tribunal. As already indicated, the Competition Tribunal is the body responsible for making a ruling in the matter. After it has made a ruling, the losing side can appeal to the Competition Appeal Court. After the Competition Appeal Court makes a decision, the losing side in the matter can try to appeal to the Supreme Court of Appeal or even the Constitutional Court.

It is also possible that the entire matter may be resolved "out-of-court" before the end of November. If the complainants and GSK and BI can reach agreement ensuring access to a sustainable supply of affordable ARVs, the complainants may decide to withdraw the complaint. In such circumstances, the Commission may still decide to refer the matter to the Tribunal, if it is not happy with the terms of the agreements.

In addition, the Competition Act allows the Commission to reach similar agreement with the two companies. Such an agreement is called a consent order once it has been approved by the Tribunal. If this happens, the complainants may still decide to refer the matter to the tribunal themselves to ensure that people who suffered loss as a result of past excessive pricing of the medicines can sue the companies for damages.

11. What is the private sector price of GSK and BI's antiretrovirals?

GSK sells AZT (300mg) for R582 per month in the South African private sector (excluding VAT). It sells lamivudine (150mg) for R640 per month. It sells the two in a single pill format (Combivir) for R800 per month. BI sells nevirapine for R360 per month.

12.What could they cost?

The Generic Anti-retroviral Procurement Project (GARPP) has been quoted R200 for a month's supply of d4T, lamivudine and nevirapine, and R300 for AZT, lamivudine and nevirapine. These prices are for generic ARVs that are already registered by the MCC.

On 23 October, the Clinton Foundation announced that it had made a deal with generic manufacturers Aspen, Cipla, Ranbaxy and Matrix on the prices of their antiretrovirals. These companies will sell triple-drug therapy for about R81 per month. This is excellent progress although it only applies to the public sector. With the exception of Aspen, we do not yet know which (if any) of the other manufacturers have been licensed by GSK and BI. Without such licenses, these companies cannot sell to the public sector without infringing patents.

In the private sector, Aspen alone is licensed by GSK to sell antiretrovirals. No generic company is licensed by BI. Furthermore, the generic antiretrovirals that are produced under license from GSK are not yet registered with the Medicines Control Council and the generic antiretrovirals that are already registered with the Medicines Control Council are not licensed by GSK or BI. This is an unacceptable situation that needs to be rectified immediately.

Questions about the TAC Treatment Project and GARPP requests for licenses from BI to import generic nevirapine

13. Why have the TAC Treatment Project and GARPP asked BI for licenses to import generic nevirapine?

The TAC Treatment Project and GARPP could import generic nevirapine at about R70 for an adult's monthly supply. BI charges R360 per month for the patented version. Both organisations could treat many more patients and therefore save many more lives if they could buy the generic nevirapine. In addition, the TAC Treatment Project and GARPP also want to import other forms of nevirapine, such as the combination pill containing d4T, lamivudine and nevirapine.

14. Do the TAC Treatment Project and GARPP expect BI to allow the importation without anything in return?

No. The TAC Treatment Project and GARPP have offered to pay a royalty of 4% to BI. This means the projects would pay 4% of what they pay for the generic drugs to BI.

15. What will happen if BI refuses to grant these license requests?

BI has until 27 October 2003 to respond to the license requests. If they do not grant them, the TAC Treatment Project and GARPP will apply to the Commissioner of Patents for compulsory licenses. If this application succeeds, they will be able to import generic nevirapine.

16. What actions can the Commissioner of Patents take against BI?

The Commissioner of Patents can issue licenses to the TAC Treatment Project and GARPP for the importation of generic nevirapine products.

17. How long could a compulsory license application take?

The decision of the Commissioner of Patents could be taken on appeal to the Supreme Court of Appeal, or even the Constitutional Court if it raises constitutional issues. If TAC wins a decision at any point along the way, the drug companies could be forced to allow generic competition until a final court ruling is made.

18. On what basis should GSK and BI grant voluntary licenses?

Any generic company whose AZT, lamivudine or nevirapine products are registered with the Medicines Control Council (MCC) should be able to get a voluntary license from GSK or BI, either for importation or for local production. If a drug (or combination of drugs) is registered, it means that the MCC is satisfied that the drug is safe, effective and of acceptable quality. Safety, efficacy and quality should be the only considerations for determining which generic medicines are available in South Africa.

The royalty fee that GSK and BI charge should be no more than 5%. This means that generic companies would pay a maximum of 5% of their sales on these products to GSK and BI.

Any generic company that receives a license should be able to sell their medicines to the public and private sectors. If such a license is for local production, TAC believes that there should be no limits imposed in South Africa on exports.

19. Is a royalty of 5% reasonable?

The 5% level is generally accepted as an average reasonable royalty, with the range being from 2-10%. In Canada, for example, a 4% royalty fee accompanied the issue of compulsory licenses in the past. Given the size of the HIV epidemic and the need to reduce ARV prices to as low a value as possible, 5% is clearly reasonable.

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