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[e-drug] Re: Massive reduction in ARV tender prices in South Africa (3)

Dear E-druggers

At the risk of being provocative but in no way intending to undermine the 
enormity of progress in South Africa and the benefits it will bring:

- more people will be treated at a lower cost,
- the centralised procurement may be more effective and build internal 
health systems capabilities (including the extra-ordinary work done on 
stockouts elsewhere),
- the disclosure of pricing information (something South Africa 
struggled with regarding manufacturers exit prices - a problem that 
STILL plagues the WHO and HAI price studies),
- the sophisticated and welcoming response from South African civil 
society groups, etc.

- On context:
This is more than a decade after South Africa tried to use its legal 
rights under TRIPS flexibilities (whatever may be said about Mbeki, he 
did initiate the laws allowing for this for ALL medicines relevant to 
public health) which it still has not been able to use. Competition laws 
are seen to be more appropriate, but have not resulted in the perfectly 
legal option of the issue of compulsory licenses.

The US has, and now even Europe is considering something similar, a name 
and shame list that punishes countries for using perfectly legal rights 
in situations where actually no argument could sustainably be against 
the public health interest. These countries have paid an enormous 
diplomatic and economic price, not least South Africa.

And legal norms affecting access to medicines are set in non-transparent 
settings including on neglected diseases(WHO), and now most recently 
with the Anti- Counterfeiting Treaty (so much for the announcement of 
the importance of international health diplomacy).

And the US has openly come out critically of too much developmentalism in 
intellectual property.
[Please fix link in web browser - moderator]

And so given this context it is amazing that SA managed to do something 
at all, but overall the access to medicines movement is still sustaining 
real losses!

- On Economics
I am concerned that the preponderant praise is for improved access 
without sufficient attention to the complex dynamics of productive 
capacity. While ALL our people are entitled to immediate access to all 
medicines they need, the contextual arrangements of what the 
pharmaceutical business is requires Africans to take productive capacity 
and national ownership much more seriously. Pre-WTO, productive capacity 
and technology transfer understood that consumption of technology rich 
goods was not tech transfer. Yet in health it seems to be.

Generic producers operate in difficult environments where the Big 
Players dominate, and also influence and set the rules of the game to 
their advantage. This makes the situation precarious for producers in 
Africa. Ownership profiles are also changing with Big Pharma entering 
the generics markets presenting huge challenges to generics producers as 
they can leverage their distribution and marketing networks quite 
effectively. It is not possible even for government regulation to get 
decent pricing information from this sector, just like it is virtually 
impossible to determine the "reasonable" market price for a patented 
product. A focus purely on price, excluding ownership, local production 
and national capability development, risks leaving the competitive 
sector which does bring price reductions at a significant disadvantage. 
This is doubly the case because generics producers would also like to 
make greater profits as is natural, but have more need to do so as their 
markets are volatile and they may have less capability of riding out 
downcycles. There is the case for long term thinking by the state in 
procurement practices.

Procurement practices have to include conditions for differentiating 
between different producers: national, owned in the region, foreign 
owned and with a commitment to local production (bringing in 
technologies and know how, commitment to reinvestment and expansion, 
local partnering, etc.) and foreign owned but with less commitment to 
building productive capacity.

The reason for this is that it is quite apparent that aid is 
unsustainable and lots more can be done within existing budgets in 
Africa, including other issues like rational use of medicines.

Preferring  production to companies within the region who are committed  
keep profits in the region and invest in productive capacity should be 
given preference (including cost advantages). This is the one lesson we 
should learn from the continuing sorry state of affairs of the access to 
medicines to our people. And it is a sorry state, even for 40 million 
Americans despite the denials.

Building this productive capacity may require finely balanced trade-offs 
between needs and the costs of building a strong pharmaceuticals base in 
the African regions. And a balance can be worked out as it will be more 
sustainable in the longer term when local entrepreneurs (and public 
sector producers where costs are too high) with a good productive base 
enjoy vested interests in seeing adequate provision of medicines. It is 
not about autarchy, but about a plan for increasing self reliance. South 
Africa needs to both increase the size of the market (which it has 
neatly done with centralised procurement) and to favour production on 
the continent. It also needs to work out clear plans for disciplining 
foreign owned players.

So while there is cause for applause, the actions in South Africa demand 
that the bar be raised. And one of the key issues would be to reduce the 
demands for tariff cuts from the WHO, at the WTO, and from the EU in the 
EPAs. It is crazy to argue against already very low tariffs when the 
problem is monopoly pricing. The position on tariffs should be seen as a 
direct stance against building African capacity - because economically 
speaking that is what it is - if tariffs are bad then by the SAME logic 
so are intellectual property rights. This is an extreme double standard. 

Tariffs can be used strategically and it need not just be about being 
higher, they can also be a stick to force prices lower that are not 
warranted by international competitive standards. And it is this 
flexibility (aside from WTO and WHO not protecting the legal rights of 
members under international agreements) that is under continual attack.

Providing an increasing amount of medicines produced on the continent 
need not remain a utopian vision, crisis does bring opportunity...

Riaz Tayob
SEATINI South Africa

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