By Charlotte Denny and James Meek
Guardian
UK
April 19, 2001
The drugs industry's court case against the South African government will go down in history alongside Shell's embarrassment by Brent Spar as one of the great corporate PR disasters of all time.
The hard lesson that the big pharmaceutical companies have been taught in South Africa, where they have been forced to retreat from their attempt to stop the country importing cheap Aids drugs, is that there can be no global marketplace without a world sense of right and wrong.
However much the industry insisted that the cost of patented drugs was not the main problem for African governments, the public perception was that the companies were more interested in protecting their intellectual property rights than in the health crisis in the continent.
South Africa, with the world's highest number of Aids sufferers, was precisely the wrong country at which to aim its campaign to prevent poor state buying cheaper generic copies of patented drugs. Although Pretoria has a patchy record on facing up to the Aids crisis, it was prepared to stand by its right under international trade rules to import generic drugs during a national health emergency.
Now, belatedly, the companies have realised the damage the case has done to their public image. A settlement is expected today in which Pretoria will clarify its intention to interpret its 1997 Medicines Act under World Trade Organisation (WTO) rules. But it will not rewrite the law, as the companies wanted.
The companies argued that the act allowed Pretoria to override patents at will. The government said it only planned to use the act in the spirit of the WTO's patent rules, which allow intellectual property rights to be overriden in exceptional circumstances. Campaigners argued that the Aids crisis was an emergency as defined in the Trade Related Aspects of Intellectual Property Rights (Trips).
The decision of the 39 drugs firms involved to halt the case, expected to be confirmed today, is a big defeat for US and European corporate lobbyists, in the agricultural as well as in the pharmaceutical sectors.
They thought it possible to exploit the rules for world trade in such a way as to make 6bn consumers dependent for redress on a handful of easily influenced regulators. International public opinion and a worldwide web of activists, forces which the corpo rations had not counted on, appear to have made them change their minds this time.
Now attention switches to a more difficult arena: the case being brought by the US government, backed by the American Pharmaceuti cal Research and Manufacturers Association, against Brazil, which makes cheap copies of patent Aids drugs.
They say that Brazil is flouting Trips. The case will go before the nearest thing to a world court with teeth - the WTO in Geneva. Campaigners cite Brazil as a successful example of how a relatively poor country can treat Aids if it has access to cheaper generic drugs. Aids deaths have halved since the government began providing cut-price treatment.
Merck and Pfizer, the companies leading the campaign against Brazil's generics industry, must be re-evaluating their strategy. But it will be harder for big drugs companies to admit defeat on this one.
South Africa's huge HIV problem, its tragic recent history and the saintly figure of Nelson Mandela made the companies" case look egregiously sleazy; on the level of hard-headed calculation, it is a relatively small market.
Brazil is different. Poor as it is, it is much richer than sub-Saharan Africa; it is a genuine potential market for the drugs giants. More significantly for the world, if the Trips tribunal backs Brazil, it will establish the principle that poor countries can override patent rules in the interests of public health.
Campaigners now want the safeguard rules in Trips to be clarified and trade negotiators to revisit the whole issue of patent protection in poor countries when the WTO discusses intellectual property rules in September. Ominously for the drugs companies and their shareholders, the South Africa case and the forthcoming showdown in Geneva raise uncomfortable questions about big pharmaceutical companies' lack of financial transparency.
The arguments in favour of patents on drugs, which give corporations long monopolies on their production and sale, centre on the cost of the research needed to invent the medicine in the first place.
The companies say they need worldwide patent protection to recoup the millions spent on developing the drug. But attention is now focusing on the lack of information about how much they spend on research, their huge profits, their dependence for many breakthroughs on publicly funded laboratories, the huge sums spent on marketing, and the disproportionate amount spent on developing drugs for lifestyle problems such as obesity in the developed world.
But the developing world's ability to defy the US on international trade is limited and it will be looking to Europe states, more resistant to corporate political power, to lead an attempt to draft a more just Trips regime.
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