E-DRUG: TAC briefing paper on SA drug law
[Some background on the Medicines Act which is being debated
before the court from next monday 5 March. This viewpoint from
TAC. Copied from www.tac.org.za as fair use. NN]
TAC Fact Sheet
The Medicines and Related Substances Control Amendment Act 90 of 1997
-- A Step Towards Ending Apartheid in Health care
Why do we need a new law on medicines?
In 1994 the new South African government inherited a racially divided and
unequal health sector. On the one hand there was/ is a private health
made up of highly paid doctors and advanced medical facilities. But this
serves only 20% of the population -- but accounts for 80% of national
on health. On the other hand there is the public health sector, where 80%
the population seek care - but where only 20% of health expenditure takes
Making health care more accessible to South Africa's poor is now a
constitutional duty facing the government. Our Constitution says that:
has the right to have access to health care services. The state has a
constitutional duty to progressively improve health care access for
In many respects making health care accessible means making it more
Private and public health care are not independent of each other. If
care is expensive it means that more people depend on public hospitals.
Similarly, if doctors and nurses get highly paid in the private sector,
health workers are sucked away from public facilities. To improve the
sector we must also address the distortions in the private sector. That is
it is our government's policy to try to make private care more affordable,
that there are less people and more resources available for the public
A range of policies and laws have been introduced. For example, the Medical
Schemes Act, aimed to make private health care more widely available by
unfair membership barriers and strengthening regulations governing the
Another area of focus has been on the affordability of medicines, where one
major aim has been to increase the amount of money available for other
services by decreasing the amount spent on medicines.
The market for medicines in South Africa is very distorted and has been
profitable for multi-national drug companies. Lack of control of medicine
prices, and practices in the dispensing and supply of medicines, has
very high prices to be set for private doctors, clinics and hospitals. This
fuelled medical inflation which in turn has remained a barrier to wider
to private care.
By contrast, in the public sector, patented medicines have largely been
unaffordable, and generic medicines have been sold at prices far above what
normal in many other countries.
ú In 1999 66% of people in a survey said cost was the main reason for
seeking health care when they were sick.
ú 40% of African people said that access to medicines had got worse.
More than three years ago, on 31 October 1997, Parliament passed the
and Related Substances Control Amendment Act, No. 90 of 1997 (Medicines
The National Council of Provinces passed the Medicines Act on 20 November
and President Mandela signed the law on 25 November 1997. This law amends
changes the Medicines and Related Substances Control Act, No. 101 of 1965.
The new law contains measures that will make medicines more affordable and
improve the functioning of the Medicines Control Council.
On 18 February 1998, the Pharmaceutical Manufacturers Association (PMA) and
forty multinational drug companies tried to stop the Medicines Act by going
Court against the South African government. After nearly three years of
and counter-delays, the case will be heard in the Pretoria High Court from
12th March 2001. In this period of delay, more than 400 000 people have
of AIDS-related illnesses. Many people have died because they cannot
But why are the drug companies taking the government to court? Across the
world, drug companies made sales of more than $315 billion in 2000. This
more than the gross domestic product of all the 12 countries in the
African Development Community (SADC). Fortune Magazine has shown that the
companies make super-profits. The drug companies complain that the
is trying to expropriate its property and that it is giving the Minister of
Health too much power. In fact, they fear competition and being exposed as
organisations that profiteer from medicines.
TAC supports the law because it introduces a legal framework to make
more affordable in the public and private health care sectors. This fact
will explain this legal framework.
How does the government intend making medicines more affordable?
The Medicines Act introduces four important elements to contain health care
costs to government and the private sector.
ú Generic substitution of medines that are no longer under patent is
important part of the law. This means that a pharmacist must offer a
the generic version of a brand name medicine. A generic medicine is a drug
the same quality active ingredient that a brand name drug.
ú Another element of the Medicines Act is the introduction of a
committee that will set up transparent pricing mechanisms. Pharmaceutical
companies will have to justify the prices they charge.
ú The third part of this law is the parallel importation provision -
as section 15C of the Medicines Act. This measure allows the government to
import the same medicine sold by the same company or its licensee at a
price in another country.
ú The Medicines Act also allows international tendering for medicines
in the public sector.
Governments across the world recognise that the costs of medicines are
unacceptably high. These measures are used in many countries to lower the
of medicines and they are legitimate. Yet, the US government and the
Union supported the drug companies. Activists in HealthGap Coalition,
International Gay and Lesbian Human Rights Commission and South Africa
President Clinton to stop the official pressure by issuing an Executive
pledging not to interfere with legal measures taken by governments in
reduce the cost of medicines. The European Union has also changed its
But now the new US administration under George Bush is threatening to
Generic Substitution - What the Medicines Act Says
The Medicines Act says that a pharmacist must inform everyone who buys
prescribed medicines of generic alternatives and their benefits. A
is required by law to dispense the generic unless the patient expressly
the substitution. Generic substitution is also not allowed if the doctor
no substitution on the prescription, where the product has been declared
substitutable by the Medicines Control Council, or, if the price of the
medicine is higher than the brand-name medicine.
What the Medicines Control Council Said
Professor Peter Folb former MCC chairperson said: The South African public
rest assured that the generic medicines available to us in this country are
thoroughly assessed and monitored, that they are of high quality and
comparable with the innovator products, and that the drive towards
wider use of generic medicines is not in conflict with the public health.
Generic medicines are, or should be, demonstrably more affordable.
What the South African Pharmacy Council Said
The Pharmacy Council said that research and debate showed the advantages of
generic substitution but the implementation of generic substitution was,
however, always opposed due to expected lobby power from those who stood
most to lose if such implementation is successful.
Generic Substitution - What the Drug Companies Say
The drug companies claim that generic substitution is unfair
They also say the quality of generics will be much lower. What is their
reason - G. Farber, then CEO of SmithKline Beecham told Parliament that
substitution will remove the ability of my company to retain the profits
its pharmaceutical operations to which it is entitled as the result of
substitution by default. TAC says Mr. Farber and his drug company friends
not lose profits they will lose the super profits that they make from
Generic Substitution - How will it affect you?
Many people in South Africa receive care from a private doctor who
medicines for them. Wealthy households are not the only users of private
doctors. In 1995, 19% of households with an income of less than R885.00
month relied on the private sector for health care services. They take
prescriptions to a pharmacy where they, or, their medical aid pay for the
medicine. Doctors often do not think of the costs of medicines, or, they
bonuses from drug companies for prescribing medicines. People who have
and all households will find that generic prices are much lower for the
good quality medicines. This means that households will spend less on
and many more will be able to afford medicines. Medical aid costs will
This is an extract from an official report of the United States Government:
In 1996, 43 percent of the prescription drugs sold in the United States (as
measured in total countable units, such as tablets and capsules) were
Twelve years earlier, the figure was just 19 percent. Generic drugs cost
than their brand-name, or "innovator," counterparts. Thus, they have played
important role in holding down national spending on prescription drugs from
it would otherwise have been. Considering only sales through pharmacies,
Congressional Budget Office (CBO) estimates that by substituting generic
brand-name drugs, purchasers saved roughly $8 billion to $10 billion in
Three factors are behind the dramatic rise in sales of generic drugs that
made those savings possible. First, the Drug Price Competition and Patent
Restoration Act of 1984--commonly known as the Hatch-Waxman Act--made it
and less costly for manufacturers to enter the market for generic,
drugs. Second, by 1980, most states had passed drug-product substitution
that allowed pharmacists to dispense a generic drug even when the
called for a brand-name drug. And third, some government health programs,
as Medicaid, and many private health insurance plans have actively promoted
generic substitution. Box ends
Price Control - What the Medicines Act Says
The Medicines Act says that the Minister of Health must appoint a pricing
committee. The pricing committee can recommend that the Health Minister
regulations on the introduction of a transparent pricing system for all
medicines. Drug companies will be allowed to set a single exit price for
medicine. Pharmacies will not be allowed to charge an amount higher than
exit price. Instead, the Pricing Committee will recommend a dispensing fee
pharmacists can charge any person.
What the drug companies say?
The drug companies say that price controls will interfere with their
constitutional right to trade. They want this provision in the Medicines
be declared unconstitutional. Drug companies always declare that they
money on research and development. TAC supports the creation of a pricing
committee that would be able to establish their real costs on research,
development and production.
Price Control in Other Countries
The South African Pharmacy Council notes that in most major markets
have introduced some form of direct or indirect price control. Direct
controls have been introduced in Germany, Netherlands, Sweden and Denmark.
follow a reference pricing system in which a fixed price is set for a group
pharmaceuticals. This system is popular because it sets prices for medicine
categories rather than every individual medicine. Indirect Price Controls
applied through tendering, negotiations, global prescribers budgets,
buying in the public sector and by bulk buyers.
Since 1987, Canada introduced a Patented Medicines Review Board. Drug
have tried to challenge the constitutionality of this measure and lost.
though not perfect, the Canadian price control system has managed to keep
prices of patented medicines significantly lower than the inflation rate.
Canadians paid much more for patented drugs before the price controls
to other countries. Since 1987, they have paid consistently less for
Parallel imports - What the Medicines Act Says
The Medicines Act empowers the Minister of Health to prescribe conditions
the supply of more affordable medicines in certain circumstances to protect
health of the public. The law also allows the Minister of Health to import
same medicines made by the same company or someone they had licensed if it
sold at a cheaper price in another country. For example, GlaxoWellcome
the drug Zantac used for ulcers. Glaxo sells Zantac at a very low price in
and at a very high price in the USA or Indonesia.
Glaxo Wellcome Prices in rupees (April 1998)
ZANTAC India Indonesia Britain USA
10 X 300mg Rs17.39 Rs658.36 Rs603.24 Rs1200.38
Parallel Importation - What the Drug Companies Say
The drug companies say that parallel importation conflicts with the World
Organisations rules on intellectual property. They are wrong. Article 6
TRIPS -the agreement on intellectual property rights says that the
does not cover parallel importation. Many countries of the European Union
even the USA use parallel importing.
Parallel Importation -the Philippines Example
The most recent example of parallel importation has been from the
government. The Philippine Department of Health and Department of Trade
Industry used a state-owned company to buy the same medicines from the same
companies sold at a lower price in India. Instead of paying 5 million
Phillipine dollars for the medicines, the shipment only cost the government
million Phillipine dollars. The Pharmaceutical and Health Care Association
the Phillipines took the government to court. The drug companies asked the
court to stop the parallel importation by the government because it
their patents and other intellectual property rights.
The Phillipines Supreme Court court refused their application and argued
the importation of the "similarly branded medicine" in accordance with the
subject A.O. No. 85 will be beneficial to patients of Government hospitals
making these drugs available to them at a price lower than the prevailing
of the same drugs dispensed by the members of petitioner association.
The Medicines Act deserves the support of all people in South Africa and
internationally. It is an attempt to improve health care by lowering the
of essential medicines. In a country with over four million people living
HIV, this is especially important. If the Pharmaceutical Manufacturers
Association succeed with their legal action, it will be an enormous blow,
could delay by many years the possibility of affordable medicines and
health care for poor people in South Africa and throughout the developing
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