The Treatment Action Campaign demands quality life-saving medicines for all

Corporate profiteering has the protection of the state in South Africa, the European Union and India. This is illustrated in the two issues reported by the Treatment Action Campaign and Section 27 incorporating the AIDS Law Project in the posts below.

1) The first post deals with a court judgment on the 2008 ARV tender that has cost the state millions of rands.

2) Trade pressure by the European Union on the Indian Government to allow drug companies to make excessive profit for life-saving medicines for longer than the World Trade Organization demands.

THE IRREGULAR ARV TENDER AND THE US DRUG COMPANY

One of the world’s top ten drug companies Merck (MSD) and also one of the most lawless in pursuit of profit won the 2008 tender for the ARV drug efavirenz (EFV) from the South African government despite the fact that a good quality generic version was available.

In 2007, TAC and the ALP laid a complaint at the Competition Commission against Merck the US multinational drug company. The Competition Act holds that a dominant firm (holding more than 45% of market share) may not charge an excessive price to the detriment of consumers.

TAC argued that Merck was profiteering from efavirenz one of the most important drugs of the first line ARV regimen. In six months, between January to June 2007, MSD sold ± 296 000 units of EFV… at a cost of R46.3 million. Merck controlled 80% of the market.

ARV treatment involves using three or more drugs — efavirenz is one of at least four drugs that the government buys. However, 64 cents of every rand spent on ARV medicines by government was spent on Merck’s drug alone. Higher prices means less treatment. Less people on treatment means more illness and death.

In 2008, following the complaint Merck informed the Competition Commission that it would grant licences to four generic companies. TAC withdrew its complaint on the basis that Merck would follow the rules.

We were then surprised that Merck won the tender. The generic medicines were cheaper and this meant more than half of the ARV drug budget would go to Merck. The North Gauteng High Court has now exposed the irregularity of that tender. The Indian generic manufacturer Aurobindo approached the Court on the grounds that the tender was unfairly awarded. In a judgment handed down 02 July 2010 Court ruled against the government and Merck.

This case illustrates that a degree of collusion (between Merck, the US-based multinational and the South African government) ensured that it was awarded the licence. The statement from Section 27 incorporating the AIDS Law Project on the case and the judgment shows that government must guard against corruption from business.

THE EUROPEAN UNION PRESSURES INDIA

Trade pressure is the weapon of choice by rich countries when dealing with their poorer counter-parts.

When Bill Clinton took office in the US, President Mandela’s government wanted to make medicines more affordable in South Africa. The Mandela administration wanted to make generics available on the same basis as US law provides for people in that country.

The Clinton administration placed South Africa on a sanctions watch list until US activist and international pressure forced them to lift it.

Today, the European Union also places profit before life in the same way. Six of the twelve top drug companies are European and the others American. The EU drug companies use their governments to prevent Indian generic competition. In negotiations for a new trade treaty, they demand that India should give greater protection to drug companies than the World Trade Organization demands. In November 2001, the WTO members issued the Doha Declaration which states:

We agree that the TRIPS Agreement does not and should not prevent members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO members’ right to protect public health and, in particular, to promote access to medicines for all.

Today, corporate European Union is again trying to take away the rights of people across the world to life, dignity and health. The Indian government should not give in to trade blackmail at the cost of people’s lives.

All drug companies “brand” or generic are interested in profits — it is the duty of governments to regulate them in the interest of people. Make your voice heard against the European Union’s blackmail and India’s willingness to compromise.

Zackie Achmat

Nomfundo Dubula leads TAC Protest at Parliament 2003

Transparency and fairness must be enforced in 2010 ARV tender process — Section 27 incorporating the AIDS Law Project

High Court finds part of 2008 ARV tender procedurally unfair
Company with lowest prices unfairly excluded from bidding
Questions raised as to motive for company’s exclusion

Invitations to bid for the next tender antiretroviral (ARV) tender are expected to be announced shortly. As previously indicated, SECTION27 supports the Minister of Health’s intention – as indicated in his budget speech of 13 April 2010 – to procure ARV medicines “at the lowest possible cost from whatever source that can guarantee us the lowest prices”. It is with this in mind that we are concerned about the findings in Aurobindo Pharma (Pty) Ltd v The Chairperson, State Tender Board and Others,[1] a case which addressed one aspect of the 2008 tender for ARV medicines.

On 19 May 2010, the North Gauteng High Court handed down its judgment in this case which considered a challenge by Aurobindo – a local subsidiary of a major Indian-based generics manufacturer – to its disqualification from participating in the 2008 efavirenz tender. Efavirenz is a key ARV medicine that is used by over two-thirds of people accessing ARV treatment in the public sector.

In his judgment, Justice Prinsloo came to the conclusion “that there was a lack of procedural fairness in the process”.[2] In other words, Aurobindo should not have been disqualified from participating. In addition, he found that Aurobindo would most likely have been awarded the efavirenz tender because its prices were significantly lower than those of its competitors:

It appears to be probable that, if the point scoring system had been correctly applied, the applicant could have been awarded the tenders in respect of each of the products tendered for, in that its tendered prices were significantly lower than the prices of its competitors. Had this happened, the tax payer may also have been saved a considerable amount of money.[3]

The 2008 efavirenz tender was awarded to the following companies:

MSD (Pty) Ltd – 200mg capsules (100% of tender);
Adcock Ingram Healthcare (Pty) Ltd – 600mg tablets (70% of tender); and
Pharmacare Ltd (t/a Aspen Pharmacare) – 600mg tablets (30% of tender).

At the time of bidding, Aurobindo had secured Medicines Control Council (MCC) registrations for both products and had been licensed by Merck & Co. – MSD’s parent company – to bring generic efavirenz products to market. It was the only licensed generic company that had secured MCC approval for the 200mg product.

In a follow-up tender in mid-2009, which – like the 2008 tender – was to run until 31 May 2010, Aurobindo was awarded the contract for 50mg and 200mg versions of efavirenz. Interestingly, its 200mg product was to be delivered to the state at R142.50 for 30 days’ supply – some 52% lower than MSD’s 2008 price (R297.22) for the same product.

The judgment in Aurobindo v State Tender Board raises serious questions regarding the motive for Aurobindo’s exclusion from the process. Was the disqualification simply a technical error, or rather a deliberate attempt to exclude Aurobindo? If the latter, was the exclusion made to benefit any other company? At the very least, National Treasury needs to answer these questions, particularly in the light of the upcoming 2010 ARV tender and the urgent need for the Department of Health to be able to procure medicines at the best available prices.

Why was Aurobindo disqualified?

The official reason provided for Aurobindo’s disqualification is that the company “failed to submit a letter from the manufacturer confirming a firm supply of the items offered”. It was common cause that the products were to be manufactured by Aurobindo’s parent company in India.

Aurobindo argued that, as the authorised importer, it was not obliged to provide such a letter. It based this argument on its reading of the questions posed to potential bidders in the tender documentation. In expressing no firm view on whether such a letter should have been attached, Justice Prinsloo agreed as follows:

At worst for the applicant, the questions referred to, read with clause 7(a) , are ambiguous and create confusion which, if not responded to in a satisfactory manner, should have prompted the Bid Adjudication Committee to seek clarification rather than to disqualify the bid as unresponsive.

Why was this unfair?

MSD “also failed to comply with a condition that could invalidate its bid … but was afforded an opportunity to rectify the mistake before … the evaluation took place.”[4] Its bid failed to provide particulars relating to price structure explanations – information on foreign currency, foreign exchange rate, import percentage and minimum order quantity. Yet instead of invalidating the bid, MSD was provided with an opportunity to supply the mandatory information – which it duly did.

In defending this unequal treatment, the Chief Director: Contract Management, National Treasury and the Minister of Finance – in the answering affidavit put up on their behalf – argued that after Aurobindo’s disqualification, MSD was “the only remaining tenderer offering [efavirenz 200mg] and it was necessary to ensure that the award was made.”[5] A further, even less convincing argument, was also made – and dismissed by Justice Prinsloo.[6] He therefore concluded as follows:

The present case may not involve “subterfuge and deceit” but it is common cause that was afforded the opportunity to augment its tender after the closing date and before the evaluation date. This opportunity was also granted to to overcome the problem caused by the disqualification of . In my view there was no equal evaluation of tenders in this case so that the tender process was “stripped of an essential element of fairness” …. Moreover, given the ambiguous nature of the questions posed to …, this is clearly a case where it would be “fair to ask a tenderer to explain an ambiguity in its tender” and “fair to allow a tenderer to correct an obvious mistake” and “fair to ask for clarification or details required for the proper evaluation of the tender” ….

What is the impact of the case on the ARV supply in the public sector?

By the time the case was argued in court on 28 April 2010, the 2008 ARV tender had almost expired – it was used to procure medicines for the period 1 June 2008 to 31 May 2010. Because of this, the application to review and set aside the tender had “for practical purposes, become moot.” In addition, setting aside such a tender may have had a serious impact on the supply of ARV medicines. With this in mind, Aurobindo decided to abandon the application and only focus on the issue of costs. To be able to make a decision on who should carry the costs of the litigation, Justice Prinsloo had to make a determination as to whether the tender process was flawed.

In short, therefore, this decision has no practical impact on the supply of ARV medicines in the public sector. However, it does raise concerns about the manner in which National Treasury conducted the 2008 ARV tender, what will be done to determine why this happened, and how the state will ensure that the upcoming 2010 ARV tender is not similarly flawed. As already indicated above, there is an urgent need for the state to be able to procure medicines at the best available prices. This requires fair tender rules and a fair application of those rules, as well as a guarantee that the various bid committees are appropriately constituted.

For more information, please contact Jonathan Berger on 011 356 4112, 083 419 5779 or berger@section27.org.za
________________________________________
[1] Case no: 59309/2008 (19 May 2010)
[2] At paragraph 51
[3] At paragraph 20
[4] At paragraph 40
[5] At paragraph 48
[6] See paragraph 48

The late Kebareng Moeketsi

LETTER TO THE HIGH COMMISSIONER FOR INDIA TO SOUTH AFRICA
1 July, 2010 – 20:47 — moderator

Mr R K Bhatia
High Commissioner for India to South Africa
Post Box No. 40216
Arcadia – 0007 Pretoria
By Fax: +27 12 342 5310
23 June 2010
Dear Mr Bhatia

OUR CONCERNS REGARDING INDIAN TRADE NEGOTIATIONS WITH EU

Over a million people with HIV in South Africa are receiving antiretroviral (ARV) treatment. At least 100,000 additional people receive treatment via private or non-profit sources. ARV treatment is saving lives and stemming the decline in life-expectancy that has occurred due to the HIV epidemic.

One of the main reasons this has happened is because the prices of ARV regimens fell from over R3,000 per month in the 1990s to less than R150 per month for a standard first-line regimen used in the public sector today. Even the private sector price of one of the best first-line regimens is R532 including VAT, a fraction of the lowest 1990s prices of far less optimal regimens. If these prices were corrected for inflation, the drop would be even more dramatic. Lower prices have made the HIV treatment programme affordable for the state. Lower prices have also allowed medical schemes and non-profit private organisations to cover HIV treatment, thereby alleviating some of the public sector’s treatment burden. Without these massive price reductions, nearly a million additional people would be dead or dying now in South Africa. But these price reductions have benefited people far beyond South Africa’s borders; there are programmes in many sub-Saharan African countries providing quality ARV drugs because they are now affordable.

As this letter explains, the prospect of making new ARVs available in South Africa at affordable prices is under threat because of events unfolding in India. In particular, pressure is being applied by the European Union on the Indian government to sign a bilateral trade agreement that will stifle competition on essential medicines still under patent. The problem goes beyond ARVs. It will apply to any new medicine that is developed, whether it be for cancer, diabetes, tuberculosis or a future epidemic. Undoubtedly, this will prove to be detrimental to everyone regardless of social class and geographic location. We should all be concerned.

How ARVs became affordable

Until the early 2000s, each ARV was marketed exclusively by at most one company in South Africa usually under patent or via an exclusive license agreement with the patent-holder. Consequently there was no competition on ARVs. There is a clear chain of causation that led to most of the price reductions. In general:

1. Generic manufacturers based mainly in India (but also in Brazil and elsewhere) produced dramatically cheaper generic versions of ARVs. They could do so because medicines were not patented in India. Previously, these drugs had not been available in South Africa.

2. Activists in South Africa, the rest of the African continent, and across the world forced patent holders to license generic manufacturers to sell their medicines in sub-Saharan countries and elsewhere. Such activism included protests, successful complaints at the South African Competition Commission and threats of litigation.

3. Following this pressure the companies manufacturing ARVs and other important HIV-related medicines under patent either dropped their prices substantially or allowed generic competition.

Many ARVs manufactured in India are now sold in South Africa at affordable prices. So too are ARVs manufactured in South Africa using active ingredients ordinarily imported from India. They are registered with the Medicines Control Council, the US Food and Drug Administration and approved by the World Health Organisation. Therefore they meet stringent requirements ensuring these are safe, effective and of good quality.

The Indian Patent Act

But in 2005, the Indian government passed legislation that allowed medicines to be patented, as it was required to do in terms of its World Trade Organisation (WTO) obligations. This means that medicines developed since 1995 cannot as easily be produced by generic companies operating in India. This essentially breaks step one in the above chain of causation and makes it much harder to campaign successfully for lower medicine prices. Notwithstanding these new limitations, Indian patent law – as permitted by the WTO – still contains a number of flexibilities that allow for the market entry of generic medicines prior to patent expiry.

Since 2005, the AIDS Law Project (now SECTION27) and TAC have worked closely with civil society organisations in India to ensure the existence and use of such flexibilities. In early 2005, for example, we were part of a group of international activists who met with Indian parliamentarians in New Delhi during final deliberations on the Patents (Amendment) Bill, 2005. Our intervention sought to ensure that India’s amended patent legislation took full advantage of the flexibilities permitted under WTO law. In early 2007, we supported an international call on the Swiss-based pharmaceutical company Novartis to drop its High Court challenge to one of the Indian Patents Act’s key flexibilities – section 3(d). Although the challenge proceeded, it was ultimately unsuccessful, resulting in a key public health safeguard remaining on the statute books.

Despite these flexibilities newer drugs are being patented in India. For example, raltegravir is a relatively new and important ARV, especially for people who are resistant to standard ARV regimens, which has been patented in India. It currently costs R2,396 including VAT monthly. It is priced far too high for the South African public health system or for general use in the private sector. There is no generic equivalent of it in India or anywhere else, nor does it look likely that one will be made in the short-term. This makes it extremely difficult for activists to apply pressure on the pharmaceutical company Merck, which owns the patent on it. With no competition there is no downward pressure on the price, and it is extremely unlikely to be accessible to people in South Africa in the near future.

At least two new tuberculosis drugs are likely to be ready for registration in the next few years. These are urgently needed especially in light of the growing drug-resistant TB epidemic. It is a matter of deep concern that they might not be accessible where they are most needed: in poor countries.

Bilateral trade negotiations with the European Union

This is a bad situation, which is about to get worse. The European Union (EU) is conducting trade negotiations with the Indian government. A leaked draft of the negotiating texts has shown that the EU is pushing for the following in a bilateral trade agreement:

• Data exclusivity: Generic medicines are usually registered by showing that they are bioequivalent to the original medicine. This is a relatively inexpensive procedure. It means that a generic drug does not have to be put through expensive clinical trials since these were already conducted for the purpose of registering the original version of the drug. The EU however wants a period of data exclusivity to be enforced for new drugs. During this period the Drugs Controller General of India (the equivalent of South Africa’s Medicines Control Council) will not be able to rely on available clinical data to register a medicine. Since it would be unethical and too costly to repeat a clinical trial during this period, this condition would essentially block the registration of a generic drug during the original drug’s data exclusivity period. The length of the data exclusivity period being negotiated is five to nine years. Of concern is that data exclusivity provisions apply even in cases where patents have not been granted or where licences have been granted to generic manufacturers, undermining the public health flexibilities and safeguards that currently exist in Indian patent law.

• Longer patent periods: Currently patents are granted for 20 years –at some point before the product is submitted to a drug regulatory authority for registration. The EU is pushing for patent periods to be extended by the length of time the drug regulatory authority takes to examine an application for registration, or by the length of time a patent office takes to examine a patent application.

• Border measures: The EU wants to be able to seize medicines that are in breach of EU patents at EU borders, even if these medicines are in transit on their way to a country outside the EU, such as a sub-Saharan African one, where their use would not infringe any patents. This is not a theoretical possibility. It has already happened where the EU seized a shipment of abacavir sulphate on its way from India to Africa. The shipment was procured by UNITAID and was funded by the Clinton Foundation. 17 such seizures took place until worldwide condemnation for the EU’s actions began. Now the EU wants to legitimise such laws by pushing them into the EU-India FTA. By doing so it threatens to stop at the Indian or EU borders the export of Indian generic medicines that most African countries rely on.

None of these measures are required by the WTO. All will critically hamper the prospects for generic competition on patented ARVs in sub-Saharan Africa.

We ask you to convey our concerns to the Indian government, in particular those responsible for the trade negotiations with the EU. We call on the Indian government not to limit the options available to it under the WTO Trade-Related Aspects of Intellectual Property Rights agreement.

Yours sincerely

Vuyiseka Dubula
General Secretary
TREATMENT ACTION CAMPAIGN

Nathan Geffen
Researcher
SECTION27 (incorporating the AIDS Law Project)

Nathan Geffen

Vuyiseka Dubula