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[e-drug] TAC briefing paper on SA drug law

E-DRUG: TAC briefing paper on SA drug law
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[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
sector, 
made up of highly paid doctors and advanced medical facilities. But this
sector 
serves only 20% of the population -- but accounts for 80% of national
spending 
on health.  On the other hand there is the public health sector, where 80%
of 
the population seek care - but where only 20% of health expenditure takes
place.

Making health care more accessible to South Africa's poor is now a 
constitutional duty facing the government. Our Constitution says that:
Everyone 
has the right to have access to health care services.  The state has a 
constitutional duty to progressively improve health care access for
everyone.  
In many respects making health care accessible means making it more
affordable. 

Private and public health care are not independent of each other. If
private 
care is expensive it means that more people depend on public hospitals. 
Similarly, if doctors and nurses get highly paid in the private sector,
then 
health workers are sucked away from public facilities. To improve the
public 
sector we must also address the distortions in the private sector. That is
why 
it is our government's policy to try to make private care more affordable,
so 
that there are less people and more resources available for the public
sector. 

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
removing 
unfair membership barriers and strengthening regulations governing the
industry.

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
health 
services by decreasing the amount spent on medicines.

The market for medicines in South Africa is very distorted and has been
very 
profitable for multi-national drug companies. Lack of control of medicine 
prices, and practices in the dispensing and supply of medicines, has
allowed 
very high prices to be set for private doctors, clinics and hospitals. This
has 
fuelled medical inflation which in turn has remained a barrier to wider
access 
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
is 
normal in many other countries.
Box: 
ú       In 1999 66% of people in a survey said cost was the main reason for
not 
seeking health care when they were sick.
ú       40% of African people said that access to medicines had got worse.


Background

More than three years ago, on 31 October 1997, Parliament passed the
Medicines 
and Related Substances Control Amendment Act,  No. 90 of 1997 (Medicines
Act). 
The National Council of Provinces passed the Medicines Act on 20 November
1997 
and President Mandela signed the law on 25 November 1997. This law amends
or 
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
to 
Court against the South African government.  After nearly three years of
delays 
and counter-delays, the case will be heard in the Pretoria High Court from
5th -
12th March 2001.   In this period of delay, more than 400 000 people have
died 
of AIDS-related illnesses.  Many people have died because they cannot
afford 
expensive medicines.  

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
is 
more than the gross domestic product of all the 12 countries in the
Southern 
African Development Community (SADC).  Fortune Magazine has shown that the
drug 
companies make super-profits.  The drug companies complain that the
government 
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
medicines 
more affordable in the public and private health care sectors.  This fact
sheet 
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
an 
important part of the law.  This means that a pharmacist must offer a
patient 
the generic version of a brand name medicine.  A generic medicine is a drug
with 
the same quality active ingredient that a brand name drug.  
ú       Another element of the Medicines Act is the introduction of a
pricing 
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 -
known 
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
lower 
price in another country.
ú       The Medicines Act also allows international tendering for medicines
used 
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
price 
of medicines and they are legitimate.  Yet, the US government and the
European 
Union supported the drug companies. Activists in HealthGap Coalition,
ACT-UP, 
International Gay and Lesbian Human Rights Commission and South Africa
forced 
President Clinton to stop the official pressure by issuing an Executive
Order 
pledging not to interfere with legal measures taken by governments in
Africa to 
reduce the cost of medicines.  The European Union has also changed its
position. 
But now the new US administration under George Bush is threatening to
withdraw 
this order.  

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
pharmacist 
is required by law to dispense the generic unless the patient expressly
refuses 
the substitution.  Generic substitution is also not allowed if the doctor
writes 
no substitution on the prescription, where the product has been declared
not 
substitutable by the Medicines Control Council, or, if the price of the
generic 
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
can 
rest assured that the generic medicines available to us in this country are

thoroughly assessed and monitored, that they are of high quality and
strictly 
comparable with the innovator products, and that the drive towards
promoting the 
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
the 
most to lose if such implementation is successful.


Generic Substitution - What the Drug Companies Say

The drug companies claim that generic substitution is unfair
discrimination.  
They also say the quality of generics will be much lower.  What is their
real 
reason - G. Farber, then CEO of SmithKline Beecham told Parliament that
generic 
substitution will remove the ability of my company to retain the profits
from 
its pharmaceutical operations to which it is entitled as the result of 
substitution by default. TAC says Mr. Farber and his drug company friends
will 
not lose profits they will lose the super profits that they make from
health.


Generic Substitution - How will it affect you?

Many people in South Africa receive care from a private doctor who
prescribes 
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
per 
month relied on the private sector for health care services.  They take
their 
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
get 
bonuses from drug companies for prescribing medicines.  People who have
HIV/AIDS 
and all households will find that generic prices are much lower for the
same 
good quality medicines.  This means that households will spend less on
medicines 
and many more will be able to afford medicines.  Medical aid costs will
also be 
much lower. 




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
generic. 
Twelve years earlier, the figure was just 19 percent. Generic drugs cost
less 
than their brand-name, or "innovator," counterparts. Thus, they have played
an 
important role in holding down national spending on prescription drugs from
what 
it would otherwise have been. Considering only sales through pharmacies,
the 
Congressional Budget Office (CBO) estimates that by substituting generic
for 
brand-name drugs, purchasers saved roughly $8 billion to $10 billion in
1994 (at 
retail prices). 

Three factors are behind the dramatic rise in sales of generic drugs that
has 
made those savings possible. First, the Drug Price Competition and Patent
Term 
Restoration Act of 1984--commonly known as the Hatch-Waxman Act--made it
easier 
and less costly for manufacturers to enter the market for generic,
nonantibiotic 
drugs. Second, by 1980, most states had passed drug-product substitution
laws 
that allowed pharmacists to dispense a generic drug even when the
prescription 
called for a brand-name drug. And third, some government health programs,
such 
as Medicaid, and many private health insurance plans have actively promoted
such 
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
make 
regulations on the introduction of a transparent pricing system for all 
medicines.  Drug companies will be allowed to set a single exit price for
any 
medicine.  Pharmacies will not be allowed to charge an amount higher than
the 
exit price.  Instead, the Pricing Committee will recommend a dispensing fee
that 
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
Act to 
be declared unconstitutional.  Drug companies always declare that they
spend 
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
governments 
have introduced some form of direct or indirect price control.    Direct
price 
controls have been introduced in Germany, Netherlands, Sweden and Denmark.
They 
follow a reference pricing system in which a fixed price is set for a group
of 
pharmaceuticals. This system is popular because it sets prices for medicine

categories rather than every individual medicine.  Indirect Price Controls
are 
applied through tendering, negotiations, global prescribers budgets,
generic 
buying in the public sector and by bulk buyers.   

Since 1987, Canada introduced a Patented Medicines Review Board.  Drug
companies 
have tried to challenge the constitutionality of this measure and lost. 
Even 
though not perfect, the Canadian price control system has managed to keep
the 
prices of patented medicines significantly lower than the inflation rate. 
Canadians paid much more for patented drugs before the price controls
compared 
to other countries. Since 1987, they have paid consistently less for
patented 
medicines.


Parallel imports - What the Medicines Act Says

The Medicines Act empowers the Minister of Health to prescribe conditions
for 
the supply of more affordable medicines in certain circumstances to protect
the 
health of the public.  The law also allows the Minister of Health to import
the 
same medicines made by the same company or someone they had licensed if it
is 
sold at a cheaper price in another country.  For example, GlaxoWellcome
makes 
the drug Zantac used for ulcers. Glaxo sells Zantac at a very low price in
India 
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
Trade 
Organisations rules on intellectual property.   They are wrong.  Article 6
of 
TRIPS -the agreement on intellectual property rights says that the
agreement 
does not cover parallel importation.  Many countries of the European Union
and 
even the USA use parallel importing.


Parallel Importation -the Philippines Example

The most recent example of parallel importation has been from the
Philippines 
government.  The Philippine Department of Health and Department of Trade
and 
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
1.5 
million Phillipine dollars.  The Pharmaceutical and Health Care Association
of 
the Phillipines took the government to court.  The drug companies asked the

court to stop the parallel importation by the government because it
infringed 
their patents and other intellectual property rights.  

The Phillipines Supreme Court court refused their application and argued
that 
the importation of the "similarly branded medicine" in accordance with the 
subject A.O. No. 85 will be beneficial to patients of Government hospitals
by 
making these drugs available to them at a price lower than the prevailing
price 
of the same drugs dispensed by the members of petitioner association.


Conclusion

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
price 
of essential medicines. In a country with over four million people living
with 
HIV, this is especially important. If the Pharmaceutical Manufacturers 
Association succeed with their legal action, it will be an enormous blow,
and 
could delay by many years the possibility of affordable medicines and
quality 
health care for poor people in South Africa and throughout the developing
world.

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