A Competition Commission probe recently resulted in a patent on an important TB medicine being dropped in South Africa. Twenty years ago, a similar Competition Commission case resulted in a settlement that helped drive down the prices of several ARVs, thereby helping to set the stage for the country’s HIV treatment programme.
In Spotlight, Fatima Hassan and Leena Menghaney connect the dots between the two cases and review what has and has not changed over the past two decades.
In the late 1990s and early 2000s, South Africa faced a major uncontrolled Aids epidemic, worsened by the government’s Aids denialism. The country was at the epicentre of a global epidemic, with hundreds of thousands of people getting sick and dying, needlessly, because lifesaving antiretroviral medicines were out of reach.
At the turn of the century, the drugs were available in the private sector but only for the very rich or medically insured. The private sector price for the combination of three ARVs needed by most people living with HIV was exorbitant, thanks to patent monopolies held then by multinational pharmaceutical companies, particularly GlaxoSmithKline (GSK) and Boehringer Ingelheim (BI).
South Africans with HIV had to beg to live – by seeking donations and charity or pressuring their respective medical schemes to provide coverage.
Meanwhile, lifesaving ARVs were generally available in the Global North and in some parts of the Global South where governments like those in Thailand and Brazil had taken action to reduce prices.
Hundreds of thousands of South Africans died because they did not get access to these medicines in time.
Landmark Hazel Tau case
To challenge the high prices of key antiretrovirals, activists turned to South Africa’s newly revamped post-apartheid competition law.
In September 2002, the Treatment Action Campaign, Hazel Tau – a woman living with HIV – and several others lodged a complaint with the Competition Commission. They alleged that the price that GSK and BI were charging for important antiretrovirals was excessive and anti-competitive, undermining not just competition law but also the right to health as enshrined in the still fairly new Constitution.
The Competition Commission agreed to investigate. Several months later, it announced that there was a prima facie case of excessive pricing and that it would be referring the matter to the Competition Tribunal (the next phase of a complaint to the competition authorities).
But almost immediately, TAC was approached by GSK and BI to “settle” the matter. This meant there would be no public hearings, and the companies would not have to defend its pricing decisions in the dock.
The terms of the settlement, negotiated by the TAC’s legal team, mirrored what TAC had publicly demanded at the beginning of the case. Most importantly, GSK and BI agreed to grant voluntary licences to several generic manufacturers, allowing allow them to make and sell ARVs in question. This competition would drive down the prices of ARVs in the years that followed.
Even though the Competition Commission only has jurisdiction in South Africa, the licences included many other African countries, meaning they could also benefit from the generic competition and lower prices.
The settlement (including the terms of the voluntary licences) was agreed to by the Competition Commission, made an order and publicly announced, leading to the conclusion of the complaint.
The case, which came to be known as the Hazel Tau case, would subsequently be recognised as one of the foundations that made large HIV treatment programmes possible in South Africa and other African countries.
Despite this victory, the ongoing effects of Aids denialism meant that it would, in reality, be several years before the more affordable generic antiretrovirals would be made widely available in this country.
20 years later, spotlight on TB drugs
HIV has not been the only health crisis to affect SA. The WHO estimates that around 304 000 people contract TB in South Africa annually, and it claims more than 50 000 lives, meaning it remains one of the country’s top killers. While infection rates are slowly declining, there is concern that rates of drug-resistant forms of TB (DR-TB) are increasing. DR-TB requires newer, more expensive treatments.
As with HIV medicines 20 years ago, several of the most important DR-TB medicines are still under patent and the pharmaceutical companies that hold the patents are charging high prices or seeking to endlessly extend their patents. As a result, governments wanting to provide the treatments have had to pay up or let people die.
Part of the problem is patent evergreening – the abusive practice of extending a patent monopoly on a drug by seeking additional patents on minor modifications or improvements, thus extending this beyond the 20 years granted for the initial patent. It is a well-documented problem in South Africa and elsewhere.
We are left with a wastage of key resources in a country beset with high inequality levels: the national fiscus often overpays for lifesaving TB medicines, using public money, because otherwise, patients with TB will die. needlessly.
The primary patent on bedaquiline expired globally in July 2023, but a secondary patent (on the fumarate salt form of the drug) would only expire in 2027 in the places where it was granted.
That changed with the Competition Commissioner’s bold decision to initiate a complaint against Johnson & Johnson on bedaquiline in mid-September 2023, just a week before a major UN meeting on TB. Significantly, the initiation of an investigation into a multinational corporation’s patenting strategy (the evergreening conduct) was unprecedented for South Africa, and a new Competition Commission investigation into another key TB drug, delamanid, suggests a welcomed broader programme to review meritless patenting.
It could pave the way for similar investigations into other TB medicines.
In a surprising move, barely two weeks after the Commission announced its investigation, J&J publicly stated that it would not enforce its secondary patents in 134 low- and middle-income countries, including South Africa. As in the Hazel Tau case, pressure exerted by the Competition Commission had resulted in the door being opened in this country for generic competition.
If the Commission had not initiated the investigation, J&J would have maintained its patent monopoly in SA until 2027 – an extra four years – preventing the timely entry of more affordable generic versions of the drug.
Before the Commission's announcement, the National Department of Health was paying R5 577 for a six-month course of bedaquiline. In comparison, the Global Drug Facility (GDF – a procurement mechanism for poor countries) priced it at R2 446 for eligible countries.
South Africa’s procurement laws preclude it from buying from the GDF, something we believe J&J took advantage of. By November 2023, as a result of the Commission’s investigation, the revised price for SA was essentially the same as the GDF price at R3 148 (including VAT and logistics).
We believe J&J capitulated because its secondary patents were rejected in India and Brazil earlier in 2023 and because there was global scrutiny over its pricing practices and patenting conduct. There was a real possibility of regulatory scrutiny into its patenting practices in SA, something they clearly wanted to avoid.
Like the patent rejections in India and Brazil, this local victory has had an impact globally. But a key problem remains: the outdated patent system we have in South Africa is leaving the door wide open for evergreening patents. The Competition Commission cannot be expected to investigate every single instance after the fact.
The only sustainable solution is not to grant evergreening patents in the first place. As we pointed out, this solution has already been government policy for six years and a Bill that would give effect to it has been drafted, but the process has since stalled and the Bill has not yet been sent to Parliament.
Meanwhile, the bold decision by the Commission to investigate J&J, soon after the Covid pandemic contract ‘'bullying’’ disclosures (incidentally also involving J&J), underscore the importance of effective regulatory investigation and oversight in combating excessive pricing and abusive evergreening practices that block competition.
They also demonstrate the power of activism and the law in challenging unfair pharmaceutical practices to promote global health equity.
*Hassan is director of the Health Justice Initiative. Menghaney is Global IP Adviser at the Medecins Sans Frontieres Access Campaign.
See more from MedicalBrief archives:
J&J patent deal allows for cheaper generic TB drugs, but SA may lose out
J&J drops price of lifesaver TB drug
J&J price probe dropped after TB drug costs slashed
Long wait for South Africa to benefit from J&J MDR-TB drug patent lifting
TB diagnoses reached record high last year – WHO report