Independent Research Essay

Athisten Cooper 321883

9/22/2014

The Effect of Patent Laws on the Access to Healthcare:

a Comparative Legal Analysis of Government Practice

in South Africa

Word Count: 8176

Table of Contents

Abstract 1

Preface to Independent Research Essay 2

Introduction 2

Chapter 1: Patent Laws and South Africa 3

A Brief History On Patents 3

A South African Context 5

TRIPS 6

The Doha Declaration 7

Chapter 2: Access to Healthcare 8

The Constitution 8

Social Movements 8

Chapter 3: A Legal Measure Available to Government 11

Compulsory Licensing In South Africa 11

Chapter 4: Foreign Precedents On Licensing 14

India- The Natco Case 14

The United Kingdom 15

The United States of America 17

Chapter 5: The Position Today 18

'This is Genocide' 18

Conclusion 19

Bibliography 21

1

Abstract

Statistics South Africa's latest causes of death report highlights that the leading cause of

death in South Africa is TB, more than three times the death rate of HIV.1 TB has held the

position of leading cause of death in South Africa since 1997. These and other alarming

occurrences are what is fuelling the calls from civil society2 and other interest groups to

amend the South African patent system. The resultant pressures for patent reform have led to

the release of the Draft National Policy on Intellectual Property3. This government policy

places at its epicentre the rights of citizens to access to healthcare. The publishing of the

Draft Policy brings to the fore concerns that highlight the position of many developing

nations. In particular, the barring of access of many underprivileged citizens to unaffordable,

or otherwise inaccessible healthcare, has been the focus of the patent amendment movement

since the inception of the agreement on Trade Related aspects of Intellectual Property

("TRIPS").4 The Draft Policy highlights many concerns facing South Africa as a developing

nation, both internationally- within the confines of the TRIPS agreement, and domestically by

way of the subsequent amendments to the Patent Act no 57 of 19785 in compliance with

TRIPS. These concerns show that the South African government is faced with a conflicting

task of balancing the rights of its citizens with its commitments under the TRIPS agreement.

Nevertheless the Draft Policy firmly enforces that South Africa should pursue a patenting

system that places its sovereignty above international pressures.6 Through this green paper

government openly argues that the need for compulsory licensing as a tool for providing

access to healthcare has never been greater.7

1 Statistical Release P0309.3 death report states that 10.7% of the total deaths 505 803 in 2011 were caused by

TB whilst 3.4% were caused by HIV. 2 see Joint Submission on the Draft National Intellectual Property Policy, 2013. 'MSF's, TAC's and SECTION

27's Interests, p.7. 3 notice 918 of 2013 4 The TRIPS agreement was concluded at the end of the Uruguay Round of the General Agreement on Tariffs

and Trade (GATT) in 1994, TRIPS was enacted into South African legislation by virtue of the 2002 amendment

to the Patents Act No. 57 of 1978) 5 Act 57 of 1978 as amended by the Patents amendment act, No. 59 of 2002 6 Chapter 7: Notice 918 of 2013 (Patent reform). 7 Chapter 2: notice 918 of 2013 (IP and Public Health) p. 20- 21

2

Preface to Independent Research Essay

In January of 2014 the Mail & Guardian headlined it's weekly newspaper release with an

article boldly titled 'This is genocide'.8 The minister of Health, Dr. Aaron Motsoaledi, stated

that a document had been leaked, revealing the Innovative Pharmaceutical Association of

South Africa's' (IPASA) attempts to launch a campaign to change public perception about

patent laws. The campaign 'is aimed at indirectly convincing the South African government

to strengthen, rather than weaken, patent protection for crucial drugs.'9Should the campaign

succeed, Motsoaledi believes that South Africa would not be able to afford a planned

expansion of its antiretroviral provision to people living with HIV.10 Furthermore the minister

states that drugs effective against cancer and tuberculosis would remain too expensive to do

any good, and other countries, such as 14 others intent on following South Africa's lead on

ARV's, would likewise suffer.11

“There is nothing more difficult than waking someone who is only pretending to be asleep.”

- Desmond Tutu

Introduction

Entrenched in law is the existence of negative and positive rights. A negative right is the right

to inaction of others whilst a positive right enforces an obligation of action.12 The rights of

access to healthcare will always have a corollary- the interests of the proprietary rights

holder, and vice-versa. Whilst the rights of citizens to access to healthcare takes the form of a

positive right, the rights of proprietary interest holders takes the form of a negative right. The

discourse that exists in the South African healthcare context occurs when attempting to strike

8 This is Genocide. (2014) Mail & Guardian, 17-23 January, p.1 9 Ibid p.2-3 10 Ibid 11 Ibid 12 R. Lippke, The elusive distinction between negative and positive rights', p335-337

3

a balance between the rights afforded by the Constitution13 and those afforded by the Patent

Act.14

This Independent Research Essay ("IRE") will explore the competing relationship of the

Pharmaceutical Industries proprietary interests, and the individuals right of access to

healthcare as afforded by the Constitution.15 This paper places the patent-healthcare debate in

its original context under TRIPS flexibilities and inflexibilities. The paper looks at the legal

measures taken by government in ensuring that these competing interests, both positive and

negative, are satisfied. This IRE then analyses the legislative measures available to

government when enforcing the rights of its citizens. Many of whom are inevitably forced

upon the reliance of the 'access to health care' section in the Bill of Rights16in order to realise

healthcare rights and services.

Chapter 1: Patent Laws and South Africa

A Brief History On Patents

A patent is a state legalised mechanism that affords a patent holder certain exclusive rights in

respect of the patented product or process.17 These rights range from allowing the patent

holder to prevent other people from making, using, exercising, disposing, offering to dispose

of or importing the patented product in the Country in which the patent is granted.18The

requirements for granting a patent in South African are that a product or process in respect of

which the patent is sought must be novel and capable of application in trade, industry or

agriculture.19

13 The Constitution of the Republic of South Africa, Act 108 of 1996 14 The Patents Act, Act 57 of 1978 15 Section 27(1)(a) of the Constitution stipulates that "everyone has the right to have access to health care

services..." 16 Section 27 of Act 108 of 1996 (the constitution). 17 Patent Protection: Patents. (2005) Personal Finance Issue 292 March, p.8 18 Ibid 19 Chapter V, section 25 (1) of the Patents Act no. 57 of 1978

4

De Carvalho20 explains that historically there are two dominant theories on the function of

patents- the Reward Doctrine and the Prospect Theory. The Reward Doctrine explains that

patents are government rewards that are granted to inventors who contribute to either an

economic or technological progress by inventing and thereafter disclosing their invention.21

This is perhaps a theory developed from the earliest emergence of patents. The Reward

Doctrine explains the position on patents at the time of the enactment of the earliest patent

legislation- the Venetian Senate patent legislation of 1474.22 The Venetian Senate granted the

maker of any "new and ingenious device... reduced to perfection so that it can be used and

operated" an exclusive license of 10 years to practise the invention.23

The second theory on patents to emerge was the Prospect Theory by Edmund Kitch. 24 This

theory takes up a different position to the Reward Doctrine. It states that the function of a

patent is not as much about the reward received by the granting of a patent, but it is rather

about the potential that can be derived once a patent is granted. The prospect theory explains

that upon a government's granting of a patent, an inventor may not be aware of the usefulness

of the patent, and so it operates as a legal security that enables the inventor to prospect the

market for commercial opportunities.25

What transpired from the earliest forms of patents until the industrialisation periods and post

world market trade movements, is the granting of a government issued legal tenure to an

inventor, which allowed an exclusive monopoly over any benefit derived from such an

invention. The globalisation of intellectual property rights ("IPR's") was driven by

industrialized countries that had superior technological and industrialized capabilities.26

Patents had given their bearers a legal tool to monopolise trade in foreign countries.

20 NP De Carvalho. The Trips regime of Patent Rights. (2005) 2 21 Ibid 22 PS Menell. Intellectual Property: General Theories. (1999) 131 23 Ibid 24 EW Kitch, The Nature and Function of the Patent System. (1977) (20) J.L. & ECON 265-266 25 NP De Carvalho. The Trips regime of Patent Rights. (2005) 2 26 CM Correa. Intellectual Property Rights, the WTO and Developing Countries. (2002) 3

5

A South African Context

The Patent system of today's South Africa is as a result of the influence of the Agreement on

Trade-Related Aspects on Intellectual Property Rights. The South African Patent act27 under

the TRIPS regime, allows for pharmaceutical manufacturers to patent many essential

healthcare medications and lifestyle medications. Patents are granted for inventions that are

novel and inventive and furthermore these novel and inventive inventions must comply with

the administrative requirements for registration under the South African Patent Act.28The

duration of patent protection under this act is 20 years.29The effect of a granted patent during

its subsistence is to: exclude other persons from making, using, exercising, disposing or

offering to dispose of, or importing the invention, so that he or she shall have and enjoy the

whole profit and advantage accruing by reason of the invention.30

While this 20 year period of patent protection affords an exclusivity to dominate the market,

this dominance can in certain circumstances be extended under patent laws. This occurs

particularly in pharmaceutical patented products when old compounds are found to possess

new uses. This leads to patents being granted to compounds post patent expiration. Since the

law allows for the patenting of new uses for old compounds and furthermore South Africa

does not have a patent examination system that evaluates patents in detail, the dominance

afforded by the granting of a patent can be extended.

Ever-greening is another term used to explain pharmaceutical companies getting the

maximum out of a patent. Ever-greening describes a number of situations pharmaceutical

companies exploit to obtain new patents for improvements on existing drugs.31 The method

of prohibiting ever-greening, in practise, occurs through opposition proceedings of generic

companies, who are then required to apply for revocation of the "ever-greened" patent once it

is granted.32

These abovementioned practises, mostly prevalent in the case of pharmaceutical patents,

inhibit generic competition which is required to provide more affordable medication. A

generic medication is a medication made by a pharmaceutical manufacturer that copies the

27 The Patent Act, No 57 of 1978 28 Ibid 29 Ibid section 46(1) Duration of Patent 30 Ibid Section 45(1) Effect of Patent 31 B Matthewson Submissions in response to Draft National Policy on Intellectual Property (2013) (patenting

old compounds) p.19 32 Ibid (ever-greening) p.20

6

active ingredient of a lapsed patented product. Due to patent protection, a generic

manufacturer is obliged to wait for a patent to expire before it begins manufacturing the

medication, using the exact identical active ingredient as contained in the original patent.33

The difference between the generic and patented product is that the inactive ingredients of a

particular drug may vary and the trade name of the generic brand will be different to the

already established trading name of the previously patented medication.

TRIPS

At the end of the Uruguay Round of General Agreement on Tariffs and Trade ("GATT") in

1994, both developing and developed nations of the World Trade Organisation ("WTO")

concluded the agreement on TRIPS. TRIPS was to be the international standard in intellectual

property laws that all members of the WTO would adopt. At the time of the TRIPS

negotiations, the developing nations of the WTO were at best underrepresented and under

qualified.34 Only about ten developing nations sent intellectual property experts to the TRIPS

negotiations.35 These 'experts' were at times civil servants who were merely patent office

officials , even worse many of these officials were not capable of appreciating the impact of

the terms of the TRIPS agreement on their respective developing nations.36

The developed nations by contrast, were represented by leaders in technical fields of

intellectual property and influenced by the R&D-based pharmaceutical industry which is

almost exclusively reliant upon patents for its dominant global reach.37 This heavy-weight

backing led to the drafting and implementation of the most comprehensive international

agreement on intellectual property.38 At the negotiation table this agreement was presented to

developing nations by their developed nation counterparts, as a requirement to promote

innovation and to stimulate the transfer of technology and capital from developed nations to

33 M Jansen "Protecting the big names in medicine". 11 (4) The Quarterly Law Review for People in Business

212 34 D Matthews. Intellectual Property, Human Rights and Development, The Role of NGO's and Social

Movements. 1st ed. (2011) 1-2 35 Ibid 36 Ibid 37 Ibid, "Public health and access to medicines" 15 38 Ibid

7

developing nations.39This proposition led the developing nations present at the Uruguay

round of GATT to believe that mutual benefit would be derived from legislative

implementation of the TRIPS agreement. 40

The Doha Declaration

The Doha declaration on the TRIPS Agreement and Public Health was adopted by the WTO

Ministerial Conference of 2001 in Doha on November 14, 2001. The Doha declaration was

enacted to reaffirm the flexibilities of TRIPS member states when attempting to provide

better access to healthcare. It sought to appease the developing world's concerns over the

TRIPS system through reiteration of the existing TRIPS agreement:

We agree that the TRIPS Agreement does not and shall 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 in a manner supportive of WTO Members'

right to protect public health and, in particular, to promote access to medicines for all (paragraph

4).41

The Doha declaration attempted to change the perception about IPR's and how it was being

applied in practise. The message inscribed in the Doha declaration was that patent law

implementation must be aligned with Public Health needs of developing and developed

nations alike. What this declaration did was to introduce a corollary to proprietary interests of

pharmaceutical patents- the public need of accessible healthcare and medication. Paragraph 4

of the declaration42created a measure of autonomy for member states of the TRIPS agreement

to interpret legislation in such a way that the rights of individual patent holders do not trump

the demands of public healthcare. Needless to say, this autonomy always existed in the

TRIPS Agreement.43

39 C M Correa. Intellectual Property Rights, the WTO and Developing Countries: the trips agreement and policy

options. 3 ed. (2002) 23 40 Ibid 41 Paragraph 4, Declaration on the TRIPS Agreement and Public Health, adopted 14 November 2001, DOHA

Declaration 42 The Doha declaration on the TRIPS Agreement and Public Health. 14 November 2001 43 NP de Carvalho. The Trips regime of Patent Rights. (2005) 149

8

Chapter 2- Access to Healthcare

The Constitution

Section 27 of the Constitution of the Republic of South Africa44 places a duty on the State to

take reasonable legislative and other measures within its available resources, to achieve the

progressive realisation of the right of access to healthcare for all South African citizens. What

this in practise means, and the position that the Constitutional Court held in Soobramoney

and Grootboom,45 is that the state is under a constitutional duty to comply with the positive

obligation imposed on it by section 27 of the Constitution.46

In the context of this IRE, access to healthcare for South African citizens implies medications

made available to the public. For Medications to be made available to the public it has to be

manufactured by pharmaceutical companies either manufacturing in South Africa or

exporting to South Africa. Furthermore, in the context of a South African majoritarian

discourse 'access to healthcare' refers to the ability of citizens to afford healthcare or for

healthcare to be made readily available by Government.

Social Movements

The role of NGO's campaigning for the rights of the impoverished worldwide has played a

significant role in furthering access to vital treatments such as antiretroviral medications.47

The practical effect of these NGO campaigns has been to bring down the price of essential

medications exponentially.48

44 Act 108 of 1996 45 Soobramoney v Minister of Health, KwaZulu-Natal 1998 (1) SA 765 (CC); 1997 (12) BCLR 1696 (CC);

Government of the Republic of South Africa and Others v Grootboom and Others 2001 (1) SA 46 (CC); 2000

(11) BCLR 1169 (CC). 46 Soobramoney op cite para 36, Grootboom op cite para 24 and 38 47 For examples see the MSF drop the case campaign (http://www.msf.org.za/msf-publications/about-novartis-

drop-case-campaign) and the antiretroviral victory in Minister of Health and Others v Treatment Action

Campaign and Others (No 1) (CCT9/02) [2002] ZACC 16; 2002 (5) SA 703; 2002 (10) BCLR 1075; 48 Ibid

9

Due to early democratic South Africa's official HIV/AIDS denialism,49 the Human

Immunodeficiency virus was allowed to grow to uncontrollable figures. During this period

treatment was inaccessible to those living with HIV and AIDS. As a result of the

government's failure to act, social movements began to mobilise. The Treatment Action

Campaign (TAC) is perhaps the most prominent social movement to be born out of this early

denialism era. The TAC successfully combined mobilisation, litigation and mass action to

improve access to healthcare for those living with HIV and AIDS.

Section (27) of the Constitution of South Africa50 recognises healthcare as a social right. It

states that government must enact legislation to give effect to this right. This is where the

Patent Pharma debate meets its biggest obstacle- Social movement.

In Minister of Health v Treatment Action Campaign and Others51 the TAC won a major

battle against the South African government's failure to provide pregnant HIV positive

mothers with Nevirapine, the mother to child transmission treatment that prevents children

from being born HIV positive. Government had prior to this case refused to make the

patented Nevirapine available to the public through public healthcare services. The TAC

relied on the constitutional provisions of sections 27 and 2852, which affords healthcare

protection to everyone, and children in particular. The TAC relied on these sections to force

the government to provide the drug Nevirapine to mothers with HIV. The Constitutional

Court held that government must, according to the requirements of section 27(1)(2) put in

place a comprehensive program to realise the rights of pregnant women and their children to

have access to healthcare services to treat and prevent mother to child transmission of HIV53.

Minister of Health v Treatment Action Campaign and Others represents the first real success

of an NGO-led social movement forcing government to provide the access to healthcare that

the constitution recognises. The TAC had furthermore proven that the Judicial system could

be successfully utilised to force government to provide healthcare rights for its citizens.

49 The Thirteenth International AIDS conference took place in Durban, South Africa, on 9-1 July 2000. The

conference was opened by Thabo Mbeki, who argued that extreme poverty rather than AIDS was the leading

killer in Sub-Saharan Africa. Juxtaposed against this view was a speech by South African High Court Justice

Edward Cameron who argued that such complacency was comparable to supporting a system as wrong as Nazi

Germany or Apartheid South Africa"- D Mathews Intellectual Property, Human Rights and Development, the

Role of NGO's and Social Movements 1st Edition (2011) p. 99 50 Act 108 of 1996 51 (CCT9/02) [2002] ZACC 16; 2002 (5) SA 703; 2002 (10) BCLR 1075 (5 July 2002) 52 of Act 108 of 1996 53 Minister of Health v Treatment Action Campaign and Others (note 51 above)

10

In 2003 the price of antiretroviral ("ARV") treatments were placed in the spotlight, this time

the forum was the Competition Commission in Hazel Tau and Others v GlaxoSmithKline and

Boehringer Ingelheim54("Hazel Tau and Others"). In this matter the TAC, who were joined

by complainants from other civic organisations and interested parties, instituted legal

proceedings against GlaxoSmithKline and Boehringer Ingelheim. The focus of the litigation

was to drive down the prices of ARV medications that were placed out of the reach of those

dependant on it.

In Hazel Tau and Others v55 the TAC was joined in suit by a heavy weight team that matched

in size the financial backing of the pharmaceutical industry. The list of complainants

included members of the Congress of South African Trade Unions (COSATU), the Chemical,

Energy, Paper, Printing, Wood and Allied Workers Union (CEPPWAWU), persons suffering

with HIV/AIDS, healthcare workers and doctors. The legal mechanism used in mitigation of

drug prices was the Competition Act,56in particular the complainants relied upon Section 857

which prohibits the abuse of dominance.

The competition commission unearthed GlaxoSmithKline's and Boehringer Ingelheim's anti-

competitive monopoly on the ARV market in South Africa. GlaxoSmithKline had awarded

Aspen, a local generic manufacturer, a voluntary license to produce ARV's. A voluntary

license conveys rights to patented subject matter and is issued by the patent holder on a

voluntary basis.58 GlaxoSmithKline held the patent for the ARV in question and had thus

given Aspen the right to inter alia make use, sell or import the ARV.59 It transpired that the

royalty agreement between the two meant that Aspen had to pay a 40% royalty to

GlaxoSmithKline. This royalty agreement inadvertently ensured that Aspen would inflate

their drug prices in order to recoup a profit. Thus leading to little or no damage to

GlaxoSmithKline's dominance in the market. 54 Tau and Others v GlaxoSmithKline and Boehringer Ingelheim case No 2002 Sep 226. 55 At the time the case was formerly known as Hazel Tau et al. v. GlaxoSmithKline, Boehringer Ingelheim, et al.

& Aids Healthcare Foundation et al v. GlaxoSmithKline, Boehringer Ingelheim, et al. Case Numbers:

2002sep226 & 2002jan357. 56Act No 89 of 1998 57 Section 8 of Act 89 of 1998 states- "It is prohibited for a dominant firm to-

(a) charge an excessive price to the detriment of consumers;

(b) refuse to give a competitor access to an essential facility

when it is economically feasible to do so;

(c) engage in an exclusionary act, other than an act listed in

paragraph (d), if the anti-competitive effect of that act outweighs

its technological, efficiency or other pro-competitive

gain..." 58 MP Pugatch. The Intellectual Property Debate. 1st Ed. (2006) 154 59 Ibid

11

The complainants in Hazel Tau and Others successfully gathered momentum from many

social movements worldwide, eventually leading to a settlement agreement between the

parties. This settlement was strengthened by the unfortunate death of Matomela Paul

Ngubane, a complainant in the matter that suffered with AIDS. Ngubane had died shortly

after the referral of the matter to the Competition Tribunal. The settlement agreement

resulted in a drastic reduction in the price of ARV's that GlaxoSmithKline and Boehringer

Ingelheim manufactured and supplied to the South African public.

The TAC released a newsletter publication in which it explained the practical effect of the

settlement on the price of ARV medications: before the settlement, Nevirapine (the treatment

used to prevent mother to child transmission of HIV manufactured and patented by

Boehringer Ingelheim) was priced at R360 for a month supply. After the settlement

Nevirapine was R55-R80 per month.60A drop in price of 84.72%.61

Before the settlement, AZT, the most common antiretroviral in South Africa at that time

(manufactured and patented by GlaxoSmithKline) had a monthly cost of R582. After the

settlement a months' supply of AZT was R85-R100.62 A drop in price of 85.4%.

The result of the Hazel Tau case was that the social movement for access to healthcare in

South Africa had successfully utilised the Competition Act63 to lower the price of ARV

medication, subsequently making anti-retroviral treatment available to more people. This

action did not make use of any of the TRIPS flexibilities such as Compulsory Licensing or

Parallel Importations to provide greater access to healthcare. Instead, it explored and utilised

other available legal means to break the barriers to accessible health care in South Africa.

60 Ibid 61 Competition Commission Settlement Agreements Secure Access to Affordable Life-Saving Antiretroviral

Medicines. (2003) http://www.tac.org.za/newsletter/2003/ns10_12_2003.html (accessed: 6 June 2014) 62 Ibid 63 Act No 89 of 1998

12

Chapter 3: A Legal Measure Available to Government

Compulsory Licensing In South Africa

A compulsory license serves as a tool to reduce the price of patented invention such as a

patented pharmaceutical medication.64 Compulsory licenses do this by authorising a third

party to manufacture or import lower-cost generic versions, thereby encouraging competition

in the market for the respective invention, whilst concurrently driving the price of that

product down.65In an attempt to balance the rights of private citizens with the rights of the

public article 31 of the TRIPS agreement empowers governments to compel a patent-holder

to license his or her rights to generic manufacturers in exchange for monetary

compensation.66 The TRIPS agreement articulates that compulsory licensing may be used by

member states when patents cause certain deficiencies as a result of it being granted.67These

deficiencies relate to a non-exhaustive list of inter alia national emergency and circumstances

of extreme urgency68

Paragraph 6 of the Doha declaration sought to unearth a contradiction in the TRIPS

agreement- that compulsory licensing could not solve the problem of abuse of monopoly

created by pharmaceutical and other patents. 69 This because many developing nation's were

at this time seen to lack the manufacturing capacity that the concept of compulsory licensing

relied upon. 70 This meant that were a pharmaceutical company to hold a patent on an

essential medication in a developing country, and circumstances existed that necessitated the

granting of a compulsory license, it would not have been possible because of the lack of

manufacturing capacity of the developing nations.

However, in the South African context the option to issue compulsory licenses has always

been viable.71 At the time of the TRIPS agreement, until present, South Africa has always had

64 TJ Bollyky "Balancing private rights and public obligations: Constitutionally mandated compulsory licensing

of HIV/AIDS related treatments in South Africa" (2002) (18) SAJHR 535 65 Article 31 of TRIPS, Other Use Without Authorisation of the Right Holder 66 Ibid 67 Ibid 68 Ibid Article 31(b) 69 The DOHA declaration on the TRIPS Agreement and Public Health (2001) paragraph 6 70 Ibid 71 TJ Bollyky "Balancing private rights and public obligations: Constitutionally mandated compulsory licensing

of HIV/AIDS related treatments in South Africa" (2002) (18) SAJHR

13

a reputable pharmaceutical industry.72Through Adcock Ingram and Aspen Pharmacare, the

biggest generic pharmaceutical manufacturers in South African, South Africa has ample

manufacturing capacity to fulfil most pharmaceutical needs.73

Although South Africa has adequate pharmaceutical manufacturing capabilities, it's courts

have yet to be tasked with deliberating on the issuing of a compulsory license for a

pharmaceutical-based patent.74Sections 55 and 56 of the Patents act75allow for compulsory

licensing when a license is needed in the case of a dependant patent (section 55) and in the

case of abuse of patent rights (section 56). Section 56 (c) of the Patents act is of particular

importance because it allows for a compulsory license to be granted if "the demand for the

patented article in the republic is not being met to an adequate extent and on reasonable

terms".

If the circumstances mentioned in Section 56(c) prevail, and furthermore if this section is

interpreted in line with the Constitutional provisions of section 27- everyone has the right to

have access to- (a) healthcare services..." 76 government would be within its rights to institute an

application for compulsory licensing for medications under protection of patent. Article 31 of

the TRIPS on the other hand lays down five grounds for granting compulsory licenses: 1)

Refusal to Deal 2) Emergency and Extreme Urgency 3) Anti-competitive Practises 4) Non-

commercial use 5) Dependant Patents. 77 Furthermore, the TRIPS agreement does not limit

the member states right to establish further or other grounds for the granting Compulsory

licenses, such as in the 'public interest'78which is a ground for issuing a compulsory license in

German Law79.

By contrast the South African Patent Act falls short in delivering sound enabling provisions

to allow for compulsory licensing. It falls short in the substance of the laws which give

72 TJ Bollyky "Balancing private rights and public obligations: Constitutionally mandated compulsory licensing

of HIV/AIDS related treatments in South Africa" (2002) (18) SAJHR 538 73 S Woolman and C Sprague "Aspen Pharmacare: How a Major Pharmaceutical Company Created a

Sustainable supply of Low Cost Generic ARV's for South Africa.", Aspen Pharmacare case Study (2008) 74 T Govender "Compulsory pharma licensing - getting a delicate balance right : intellectual property." (2012)

(12) (5) Without Prejudice 34-36 75 Act No 57 of 1978 76 Act No 108 of 1996 77 Carlos M. Correa, Intellectual Property Rights, the WTO and Developing Countries, 'Compulsory Licenses',

89 (2002) 78 Section 24(1) of the German Patent Act states: A non-exclusive authorization to commercially exploit an

invention shall be granted by the Patent Court in individual cases in accordance with the following provisions

(compulsory license) if 1. the applicant for a license has unsuccessfully endeavoured during a reasonable period

of time to obtain from the patentee consent to exploit the invention under reasonable conditions usual in trade;

and 2. public interest commands the grant of a compulsory license. 79 Ibid

14

succinct circumstances or scenarios for the granting of compulsory licensing. The five

abovementioned circumstances for granting compulsory licenses , afforded by TRIPS, are far

more flexible than that contained in the South African patent act. Perhaps this inflexibility of

the South African Patents act, in particular its inability to fully incorporate TRIPS

flexibilities, is the reason compulsory pharmaceutical licenses have yet to be issued.

Section 15(c) of the Medicines and related Substance Control act80 provides for 'Measures to

ensure the supply of more affordable medicines'. Section 15(c) gives the Minister of health

legislative powers to issue compulsory licenses of patented pharmaceutical products in order

to increase availability of medications and lower their cost.81 However, this section falls short

of the trips requirements that, 1) the issuing of compulsory licensing be made subject to

judicial review and 2) that negotiations be entered into between the two parties, to remunerate

the patent holder once the compulsory license has been granted.

Were the provisions on compulsory licensing in the Patents act82 and the Medicines and

related Substances Control act83 combined, then perhaps a compulsory license of a

pharmaceutical patent would by now have been granted. In the current South African

healthcare diaspora the supply of affordable medication to protect the health of the public

would definitely be framed as being compliant with the flexibilities of the TRIPS agreement.

However, the Medicines and Related Substances Control act falls short of writing out the

remaining requirements which would bring this act in line with TRIPS prerequisites for the

issuing of compulsory licenses. Furthermore, if the South African government were to act out

of the TRIPS agreement then it would be an act contrary to international law and the WTO's

requirements.

The uncertainty in the legislative text then surely must be the reason that no compulsory

license has been issued by either the Minister of Health or the government as a whole. The

failure of the legislature to adequately provide for Compulsory Licensing is a hindrance to the

access to healthcare provisions of the Constitution.

80 Act 101 of 1965 81 D Mathews Intellectual Property, Human Rights and Development, the Role of NGO's and Social Movements

1st Edition (2011) 98 82 Act 57 of 1978 83 Act 101 of 1965

15

Chapter 4: Foreign Precedents On Licensing

India- The Natco case84

In March 2012, the Indian Patents Office granted its first compulsory license to Natco

Pharma Limited for the manufacture and sale of Bayer's patented cancer drug Nexavar.85The

Indian Patent Act86contains TRIPS compliant provisions that allow for a compulsory license

to be issued on the following grounds: (i) that the reasonable requirements of the public with respect to

the patented invention have not been satisfied; or (ii) that the patented invention is not available to the public at

a reasonably affordable price; or (iii) that the patented invention is not worked in the territory of India.87

The controller of the Indian Patents office concluded that all three grounds on which a

compulsory license could be issued had been satisfied, and a compulsory license was issued

to Natco with a resulting 6% royalty payable to Bayer.88 The result of the compulsory license

granted to Natco was that a price war ensued.89 Natco reduced its prices far below what

Bayer was offering and Bayer was subsequently forced to follow suit. This all happened in

the midst of a failed Bayer appeal against the issuing of the license. The appeal

unsuccessfully going all the way to the Indian Supreme Court.

Despite healthcare problems in India, a compulsory license had yet to be issued in respect of

medications until the Natco case. This decision signifies the utilisation of government

flexibilities compliant with TRIPS regulations in a manner that facilitated the improved

access to healthcare for its citizens.

84 Natco Pharma Limited v Bayer Corporation, Indian Patent Office, C.L.A. No.1 of 2011( known colloquially

as the Natco case) 85 Ibid 86 The Indian Patent Act of 1970 87 Ibid section 84 88 NS Chopra and D Muthappa, "The Curious Case of Compulsory Licensing in

India" (2012) (l 8)(2) Competition Law International 4 89 Ibid

16

The United Kingdom

The United Kingdom Patents act of 1977 allows for compulsory licensing to be granted in

specified circumstances, and in a detailed manner the act sets out the process involved

therein.90 Section 48(1) of the act91states that at any time after the expiration of three years

from the grant of a patent, the comptroller of patents may be approached by any person for:

(a) a license under the patent

(b) for an entry to be made in the registry to the effect that licenses under the patent are to be available as of

right: or

(c) where the government is a government department, for the grant of any person specified in the application

of a license under the patent. 92

If the comptroller is satisfied that any of the relevant grounds are established, the controller

may make any order as applied for or that the comptroller deems fit in the circumstances. The

United Kingdom Patent act states different reasons for the granting of a compulsory license,

this being if the proprietor of the patent is a WTO member or not a member of the WTO. One

of the grounds for such an application, which holds relevance to the access to healthcare

debate in South Africa is that a compulsory license may be applied for if "demand for the

patented product is not being met in the UK".93 Importantly, the UK patent office recognises

that grounds for a compulsory license will exist when the monopoly conferred by way of the

patent in question is operating against the public interest.94

Perhaps the most significant part of the United Kingdom Patent act95is the use of patented

inventions for service of the Crown (the British Monarchy).96 Section 55(1) states that any

government department or person authorised in writing by such department, may for the

service of the crown, do the following acts in the United Kingdom without the consent of the

proprietor of the patent, in respect of specified drugs and medicines or the production or

90 48(1)(a)-(c) of The United Kingdom Patents act of 1977 91 The United Kingdom Patents act of 1977 92 Section 48(1)(a)-(c) of the UK Patents Act 1977 93 Section 48(1)(1) of the UK Patents Act 1977 94 Section 52.2 of the Manuel of Patent Practice, the Intellectual Property office 95 Act 1977 96 Section 55-59 of the UK Patents Act 77 stipulates the circumstances in which the Crown may exploit a patent

for purposes of the Crown.

17

supply of such- "make, use, sell or dispose of for any purposes whatsoever".97 This section

creates a unique category for compulsory licensing- in the interest of the crown.

The controversial element of the use of patented inventions for the service of the Crown is

that the abovementioned acts regarding specified drugs and medicines, may be done without

the consent of the proprietor of the patent, and furthermore this act by law does not amount to

infringement of the patent in question.98

The Crown Use provision has however been utilised by the National health Service in the

provision of generic medicines.99The Minister of Health ordered medicines to be bought

through tender and required the supplier to disregard patent rights in the interest of public

health. 100 In Pfizer Corporation v Ministry of Health [1965] RPC 261 (HL) this practise was

challenged when the Minister of Health authorised the use, sale and importation of Pfizer's

antibiotic drug tetracycline in order to supply patients through the National health System.

Pfizer unsuccessfully argued that the use of the drug to treat hospital patients was not 'use' for

the Crown. The case was eventually dismissed by the House of Lords.

The United States of America

The United States of America does not have a rich history in granting Compulsory Licenses,

although it does possess the legislative means to do so.101 During the 1950's and 1960's the

US utilised government use powers similar to that of the UK Crown Use.102 It did so by

exploiting the cheaper price of medicines available from European countries.103

During the October 2001 Anthrax scare, the United States Government expressed a

willingness to set aside the Bayer patent- Ciprofloxacin, if solutions to the shortage and high

97 Section 55(1) (a)-(e) 98 Section 55.04 of the Manuel of Patent Practice, the Intellectual Property office 99 EFM 't Hoen, "UK Crown Use." in The Global Politics of Pharmaceutical Monopoly Power

www.msfaccess.org (accessed: 04 September 2014) 42 100 Ibid 101 see Title 28 USC 1498 (2006) 102 EFM 't Hoen, "UK Crown Use." in The Global Politics of Pharmaceutical Monopoly Power

www.msfaccess.org (accessed: 04 September 2014) 43 103 Ibid

18

price of ciprofloxacin were not found.104This period exposed countries like the United States

to the threat of being prisoners to their own patent systems.105

Enacted in 2006, Section 1498 of the United States Code106provides measures for the United

States Government to provide licensing relief in emergency situations. Section 1498 of the

United States Code gives any employee of the US government, or any contractor,

subcontractor or firm, acting for the US government with its consent, the right to use or

manufacture any invention described in or covered by any patent. The use or manufacture of

an invention covered by a patent of the United States shall be construed as use or

manufacture for the United States.107

The purpose of section 1498 is to grant the US Government the right to issue a compulsory

license for the benefit of the US Government. Section 1498 provides for adequate

compensation to the patent holder. Such patent holder is entitled to "reasonable and adequate

compensation", as well as compensation for the ensuing suit that follows as a result of the

governments use in section 1498.108Reasonable and adequate compensation has been

interpreted to mean the lost profits that the patent holder would have received had the

infringement not taken place.109

Chapter 5: The position today

'This is genocide'

In January of 2014 the Mail & Guardian headlined its' weekly newspaper release with an

article boldly titled 'This is genocide'.110 This eye-catching article brought to the fore a tug of

war battle that has ensued between the government of South Africa and the pharmaceutical

104 EFM 't Hoen, "UK Crown Use." in The Global Politics of Pharmaceutical Monopoly Power

www.msfaccess.org (accessed: 04 September 2014) 30 105 Ibid 106 Section 1498 in the 2006 Edition of Title 28- JUDICIARY AND JUDICIAL PROCEDURE , Supplement 5. 107 Ibid 108 Amanda, Mitchell, Tamiflu, the Takings Clause, and Compulsory Licenses: An Exploration of the

Government' Options for Accessing Medical Patents. California Law Review, Vol 95 Issue 2, April 2007, p 542 109 Ibid 110 This is Genocide. (2014) Mail & Guardian, 17-23 January, p.1

19

industry since the release of the Draft National Policy on Intellectual Property (Draft Policy)

for public comment on 4 September 2013.111

When used in an African context, the word 'genocide' typically resurfaces memories of the

1994 Rwandan Genocide in which 600 000 - 800 000 of the Rwandan Tutsi minority were

killed by a Hutu majority.112 However, rather than expressing the killing of one's own

countrymen by another, the article expresses the concerns of the Minister of Health, Dr Aaron

Motsoaledi, over the resistance that government has encountered since the release of the

Draft Policy

The Draft policy had been in development for 6 years prior to its release. In terms of the

Draft Policy, government seeks to amend Intellectual Property laws to allow for amongst

other aims-greater access to healthcare.113The policy seeks to identify holistically, problems

encountered through existing Intellectual Property laws and then to create an end destination

for Intellectual Policy laws to develop towards.

Chapters 1 and 2 of the draft policy gives light to the pharma patent debate. Chapter 1-iii)114

states that patent flexibilities can easily alleviate access to medicines. It recommends that

South Africa must change the patents act to incorporate flexibilities contained in the TRIPS

agreement. It further recommends that the act should be amended to be amenable to issues

related to access to Public Health.

Chapter 2 is on IP and Public Health, it makes many unsubstantiated statements such as "

South Africa seems to be having a problem with manufacturing and capacity, whether for generic or

innovative medicines, and should be enabled to resort to compulsory licensing and parallel

importations.115 It recommends that "compulsory Licensing should be introduced in South Africa in

line with International Treaties, such as the Doha Decision 6 of the WTO negotiations on Trade and

Public Health. 116

A staunch opposition of government in light of it publishing the Draft Policy comes from the

Innovative Pharmaceutical Association of South Africa (Ipasa). The Mail & Guardian

reported that Ipasa, in light of the release of the Draft Policy, selected a US based lobbying

111 Ibid 112 E Staub 'The Origins and Prevention of Genocide, Mass Killing and Other Collective Violence." (1999)

(5)(4) Journal of Peace Psychology 310 113 Ibid 114 of the Draft Policy on intellectual Property Notice 918 of 2013 115 Draft Policy on intellectual Property Notice 918 of 2013, Chapter 2: IP and Public Health, p. 20 116 Ibid p.21

20

firm Public Affairs Engagement to undertake a public lobbying campaign.117 The campaign

'is aimed at indirectly convincing the South African government to strengthen, rather than

weaken, patent protection for crucial drugs.118

However, no public campaign from IPASA began. Perhaps the reason for this being that for

Pharmaceutical manufacturers in South Africa, this Draft Policy contains no real threats to

pharmaceutical manufacturers and their enacting licensing. The Draft Policy does not

stipulate practically through which government arm, a compulsory license must be issued. It

stipulates that legislation must be enacted to allow for such to happen although current

legislation already contains provision to facilitate the granting of a compulsory license. It

furthermore overlooks the TRIPS safeguards which have to be complied with and places

emphasis on the Doha declaration which is of no relevance for legislative-enforcement, as the

Doha declaration is not international law.

Conclusion

It has become apparent that developing countries in general, and South Africa in particular,

are to the detriment of their own people, not fully utilising the TRIPS flexibilities.119

In considering the 'patent- access to healthcare debate', the most pertinent question is whether

current patent legislation hampers the realisation of socio economic rights, such as the right

to healthcare afforded by the Constitution. 120

The existing Patent act121 and Medicines and Related Substances Control Act122, although

very ambiguous in interpretation and lacking in technicality, do provide for compulsory

licensing. However, the failure of government to utilise existing compulsory licensing

legislation as allowed by article 31 of TRIPS is purely a lack of action and will by

government. It is a lack of action that has repercussions for the access to healthcare

provisions of the Constitution.

117 Phillip de Wet, This is Genocide, Mail & Guardian, January 17-23, Vol 30, No 3. 118 Ibid 119 De Villiers et al "Legalising parallel Imports under intellectual property law" (15)(3) (2004) Stellenbosch

Law Review 552 120 Section 27 of the constitution Act 108 of 1996 121 Act 57 of 1978 122 Act 101 of 1965

21

Amendments to legislature should compensate for the ambiguous and incomprehensive

positions regarding compulsory licensing conditions. This should include lucid remuneration

and review terms to be expressly included in Section 15(c) of the Medications and Related

Substances Control Act and the provisioning of added flexibilities in the patents act, as

allowed for in TRIPS.

The South African Government must draw inspiration from the India's Natco123case. The

compulsory licensing of essential medications such as cancer, TB and ARV medications that

remain high-priced, must take place if government is to prevent further Constitutional

infringements. South African Generic Pharmaceutical Manufacturers should be approached

by government and incorporated into a national framework to reduce the cost of medication

through voluntary licensing provisions. And only thereafter, upon the failure to enter into

licensing agreements with pharmaceutical patent holders, should compulsory licensing be

enforced through the Patent Office and Judicial avenues of South Africa.

In observing the manner in which South African Social Movement has effected reduced

prices of ARV medication through the Competition Commission, and the access of mother to

child ARV treatment through the Courts, one can only come to the conclusion that legislation

does exist to effect greater access to healthcare. Now more than ever, government must

spearhead the access to healthcare movement rather than sitting-by complacently and letting

others do so in its stead.

123 Natco Pharma Limited v Bayer Corporation, Indian Patent Office, C.L.A. No.1 of 2011

22

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'The Origins and Prevention of Genocide, Mass Killing and Other Collective Violence,

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Protecting the big names in medicine, Marlize Jansen, The Quarterly Law Review for People

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Kerstin Maria. Stellenbosch Law Review Vol 15 2004 issue 3 p550-573

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Issue 2, April 2007.

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Legislation and Government Policy

Constitution of the Republic of South Africa Act 108 of 1996

23

Competition Act, No 89 of 1998

Draft National Policy on Intellectual Property, Notice 918 of 2013.

Medicines and Related Substances Control Act 101 of 1965

Patents Act 57 of 1978

Treaties, International Declarations and Agreements

The Doha declaration on the TRIPS Agreement and Public Health, November 14, 2001

The Agreement on Trade-Related Aspects of Intellectual Property

Newspaper & Internet Articles

Phillip de Wet, This is Genocide, Mail & Guardian, January 17-23, Vol 30, No 3.

Competition Commission Settlement Agreements Secure Access to Affordable Life-Saving

Antiretroviral Medicines, TAC Newsletter, 10 December 2003,

http://www.tac.org.za/newsletter/2003/ns10_12_2003.htm,

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The Trips regime of Patent Rights, Nunos Pires de Carvalho, 2nd edition (2005)

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The Nature and Function of the Patent System, Edmund W. Kitch, 20 J.L. & ECON. (1977)

24

Intellectual Property Debate, Meir Perez Pugatch, 1st Edition (2006)

Intellectual Property Rights, the WTO and Developing Countries, The Trips Agreement and

Policy Options, Carlos M. Correa, 3rd Edition (2002)

Intellectual Property, Human Rights and Development, The Role of NGO's and social

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The German Patent Act (enacted May 5 1936) Amended By The Law of 31 July 2009

Natco Pharma Limited v Bayer Corporation, Indian Patent Office, C.L.A. No.1 of 2011

The United Kingdom Patents act of 1977

Other Articles

Aspen Pharmacare: How a Major Pharmaceutical Company Created a Sustainable supply of Low

Cost Generic ARV's for South Africa. Stuart Woolman, Courtenay Sprague. Aspen Pharmacare

case Study (2008)

Joint Submission on the Draft National Intellectual Property Policy, 2013-MSF, TAC and SECTION

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"Patent Protection: Patents" Personal Finance Issue 292, Geoff Candy.

Submissions in response to Draft National Policy on Intellectual Property, 2013, Bryce

Matthewson

The Global Politics of Pharmaceutical Monopoly Power: Drug patents, access, innovation

and the application of the WTO Doha Declaration on TRIPS and Public Health, EFM 't Hoen,

The MSF's Drop The Case Campaign- http://www.msf.org.za/msf-publications/about-

novartis-drop-case-campaign.

The United kingdom Manuel of Patent Practice, Intellectual Property Office