Since 1996, people with HIV and AIDS who live in more developed and better resourced countries have been able to benefit from taking a combination of HIV anti-retroviral drugs (HAART). These drugs, although not a cure, have resulted in an enormous decrease in the number of people dying from AIDS in such countries as the USA and England. Also, many people who were seriously sick are now reasonably well, and some people have been able to return to work for the first time in many years.

What is TRIPS and why is it important?

The agreement on Trade Related Intellectual Property Rights (TRIPS), seeks to impose international norms for patent protection and guarantees royalties to companies. When countries sign up to the World Trade Organisation (WTO), they also sign up to protect the patent rights of companies who sell products within their country. With respect to drugs, the major difference between TRIPS and previous multilateral agreements is that TRIPS requires countries to grant patent protection to pharmaceutical products for a minimum period of 20 years. Companies who have patents over their products see this as an essential element in international trade, as it guarantees them income in return for the investment they have made in the development of the drugs. However, in the case of the pharmaceutical companies, many people perceive it as putting profits before patients.

South Africa is a member of the World Trade Organisation (WTO), and all WTO member countries have to comply with TRIPS standards by changing their national regulations to follow the provisions of the agreement.

Why did the pharmaceutical companies go to court in South Africa?

Under the banner of the International Federation of Pharmaceutical Manufacturer's Association, the 39 biggest pharmaceutical companies in the world, including GlaxoSmithKline and Bristol-Myers Squibb, took the government of South Africa to court because of South Africa's 1997 Medicines and Related Substances Control Amendment Act. Paragraph 15c of this act gives wide powers to the Health Minister to override patents in the interests of public health. The South African government insisted it aimed to interpret these powers narrowly and would only use them in extreme circumstances. The pharmaceutical industry however, saw this as South Africa breaking the TRIPS agreement.

What was the outcome of the court case?

The three year court case ended on 23rd April 2001 with the South African government agreeing to set up a joint working committee with the pharmaceutical companies to draw up regulations governing the 1997 Medicines Act. The government also had to agree to abide by TRIPS. In return, the pharmaceutical companies agreed to supply drugs to South Africa at drastically reduced prices. For example, a year's supply of HIV/AIDS combination therapy will be sold for USD$600 to USD$700. These prices, although a significant reduction, still make the drugs too expensive for most people in South Africa.

South Africa will also be able to import cheap drugs from countries like Brazil and India, where the patents for a lot of the drugs that they copy have expired. This includes drugs that treat the opportunistic infections, but not the anti-retroviral drugs which combat HIV itself. A statement from UNAIDS said "UNAIDS trusts that resolution of this case will encourage broader implementation of WTO agreements and recommends that countries include in their national legislation the possibility to use the safeguards as permitted by TRIPS." As with all countries, South Africa is still allowed to cite 'National Emergency' as a valid reason for compulsory licensing and parallel importing.

What is Parallel Importing?

and taking advantage of the fact that pharmaceutical companies sometimes charge significantly lower prices in one country than in another. For instance, in Britain the list price for GlazoSmithKline's Retrovir is £125, but you can purchase the same drug imported from other European countries for as little as £54.

Geographical price fluctuations for the same product can be influenced by many factors. These can include differences in intellectual property rules, in local incomes, and in the degree of competition among producers. For example, in Brazil, the drug Fluconazole is available for US$1, whereas in South Africa it costs US$20. A 1998 study by the Consumer Project on Technology found prices for GlaxoSmithKline's version of Amoxil was $8 in Pakistan, but was $36 in Malaysia. By permitting some form of parallel imports, countries can shop around to obtain better prices, using market forces to lower national expenditures on a range of goods, including pharmaceuticals.

Since the creation of the WTO in 1995, the United States Government has been extremely aggressive in attacking parallel imports by other countries. Parallel importing of generic drugs is also possible. For many countries, particularly in Africa, parallel importing is frequently the most effective way to improve access to essential drugs, due to the lack of knowledge to produce their own drugs and the inability to obtain the necessary raw materials.

What is Compulsory Licensing?

Compulsory licensing is the term given to the manufacture and use of generic drugs without the agreement of the patent holder. A patent is a legal title granted by government allowing for the production and sale of an invention or discovery, usually for a set time period. The understanding of the concepts of compulsory licensing and patenting go hand in hand.

Even though countries sign up to the World Trade Organisation and are therefore expected to protect the patent rights of companies, they are allowed, under certain conditions, to issue compulsory licenses against the will of the patent holder. For example, if HIV rates in a country are particularly high, the government could decide that it is in the public interest to ensure that appropriate drugs are manufactured locally and made available at a cheaper price. Such action should be legal under the TRIPS agreement, though the circumstances in which a government feels justified to break the patents are fiercely debated by both the countries themselves and by the pharmaceutical companies.

Which other countries are involved in Compulsory Licensing and Parallel Importing?

India, Brazil and Egypt all import cheap drugs or make cheaper generic versions. All three countries have been threatened with trade sanctions by member WTO countries for failing to strengthen patent rules dictated by the PhRMA (Pharmaceutical research and Manufacturers of America) In India, 'Cipla' and 'Ranbaxy' produce generic drugs. In 1970, India passed a Patent Law, whereby local companies could copy patented drugs, providing the altered the process of making them. India is one of the largest producers of generic drugs in the world, but this is set to change, as WTO rules mean that India has to become TRIPS compliant by 2005. In Egypt, 90 per cent of drugs are produced locally, and in India the figure is 70 per cent. Both Argentina and Thailand also produce their own drugs.

Brazil has been one of the most successful developing countries in cutting its HIV and AIDS rates. They achieved this by invoking national emergency measures so as to allow local companies to manufacture low cost copies of anti-retroviral drugs. The US government, on behalf of the pharmaceutical companies, are taking Brazil to the WTO's tribunal, because it believes they have breached TRIPS. Brazil has made or imported 10 types of drugs that were patented before Brazil's TRIPS compliant law came into force in 1997. Its battle is for drugs patented since then and HIV/AIDS drugs are part of this group.

Brazil has been held-up as a shining light in the provision of care for people with AIDS. Since 1996, it has halved the AIDS death rate and cut the number confined to hospital by 80 per cent. It has done this by importing cheap drugs from India and by manufacturing its own drugs. The US action concerns Article 68 of Brazil's 1996 Industrial Property Act, which says it can legally make or import a drug if the patent-holding company fails to manufacture it in Brazil within three years. The outcome of the case will be important for countries such as Argentina and India, who are supposed to endorse TRIPS by 2005.