Pharmaceutical Company Law Suit against the Government of South Africa - Case Study Example

Introduction In 1998 the Government of South Africa amended the South African Medicine and Related Substances Act. Section 15 of the Act was amended to grant the government certain rights as to the production and import of patent medicines. The section further elaborated that companies’ patent rights shall not have any effect on the medicines so produced by the government. (Substances Control Act, 1965) The step ensured the supply of medicines at affordable price to protect the general health of citizens. The major purpose of the law was to meet the ever increasing challenges with regard to AIDS treatment. In 1998, there were 36 million people in the world which were HIV positive or had AIDS. The vast majority of them lived in the developing world with South Africa being the biggest victim with 4.7 million effected people. These astonishing numbers forced the government of South Africa to come up with a cheaper solution to save its citizens by providing government subsidized medicines. Pharmaceutical Company Law Suit (forty-two applicants) against the Government of South Africa (ten respondents) - Case number: 4183/98 The above stated amendment in law created a cause of concern for the pharmaceutical companies across the country and major companies filed a law suit in the High Court of Pretoria. The complainants argued that such a law was against their patent rights. The further argued that their case had nothing to do with treatment of AIDS and they were only protecting their rights granted under both international business laws and the law of the land. They took the plea that if the patent rights were allowed to be infringed then it would cause severe damage to the scientific research on innovation and development of treatment as companies invest millions of dollars to develop patent medicines. (Case number: 4183/98, 2009) The companies also referred to international trade agreements in support of their argument. Government’s Response, International pressure and withdrawal of the Case On the other hand, the government of South Africa took the stance that it was the absolute right of the government to create laws to protect its citizens’ lives. They argued that patent laws were not bigger than the constitution which guarantees the protection of its citizens’ lives and basic human rights such as access to medical care. While the government was defending the case in the court, there was increasing pressure on the pharmaceutical companies from many international quarters to withdraw the case. They were accused of negative publicity, being too keen on profits to trade over lives and death of people and having no respect to the human rights. This mounting pressure forced them to take the case back. Pharmaceutical Companies Case: A Matter of Public Opinion or Legal Standing The interesting point in the issue is that the case never got decided by the court of law. Many people argue that the case was solely withdrawn because of public pressure which was embarrassing the pharmaceutical companies but there are others who argue that the real reason behind the withdrawal was the absence of real legal standing behind the petition and the companies would have lost the case in the court had they proceeded. In the below pages we will have a look at the international practice on intellectual property rights under the TRIPS agreement and the exceptions created to this agreement for public health protection by the Doha declaration. We will, then, seek to establish the principles of international law for the above stated case both before and after the Doha declaration. The TRIPS Agreement The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) was adopted by the members of World Trade Organization (WTO) after the General Agreement on Tariffs and Trade (GATT) in 1994. TRIPS agreement provides legal base for international intellectual property rights for both manufacturing and trade. Under the agreement manufacturing and import of patent products was governed and member countries were asked to meet the requirements of the agreement in their domestic markets and also ensure that their laws were in adherence to the agreement. The Doha Declaration The TRIPS agreement was designed to cater intellectual property rights but the WTO members soon realized the darker side of it. It barred many member countries to produce and import cheap medicines because it was in conflict with the patent rights of the pharmaceutical companies. The developing countries with lesser degree of infrastructure in the field were the worst hit. Many governments started to complain against the medical side of the TRIPS agreement and this led to an international debate culminating in the WTO Ministerial Conference in Doha. At the end of the conference the members adopted a resolution known as Doha declaration. This November 12, 2001 declaration stated that certain areas of the TRIPS agreement were being relaxed to give the member states the opportunity to safeguard the health of its citizens. It was an effort to find a balance between the need of establishing intellectual property rights and the ability of member states to meet their constitutional obligations of providing a basic necessity of life i.e. medical care to the citizens. Such a stance was consistent with the demands of the World Health Organization (WHO) as well. The Declaration stated that "the TRIPS Agreement does not and should not prevent Members from taking measures to protect public health". (TRIPS, 2001) The major relaxations granted to member states under the Doha declaration include: Compulsory Manufacturing Licenses Under the Doha declaration the countries were allowed to give any third party the right to manufacture any medicine which was otherwise protected under intellectual property rights so that a required medicine could be arranged in the shortest possible time and at the cheapest possible price. Governments were asked to show caution by meeting following criterion for grant of licenses: (TRIPS, Section 31, 2009) 1. To ensure case to case handling of such licenses instead of making it a general rule; 2. To try and negotiate the deal with the intellectual property owner and granting the license to third party only after such a deal fails; 3. To payment reasonable compensation to the intellectual property owner on case to case basis. Parallel Import Licenses The Doha declaration also enables the member countries to give import license to anyone in order to provide the medicines at comparatively cheaper rates. It is based upon the principle of exhaustion which declares that if a patent holder has sold any medicine in a country then he can not subsequently stop the flow of that medicine in that particular market. The price of medicines in international markets varies and thus the same medicine’s cost can vary if imported from different importer or country. Under the rules set forth by Doha declaration, a county can now chose the most suitable price model irrespective of the intellectual property claims. Setting of Transition Period for Developing States A major feature of the Doha declaration was the extension of transition period for the lesser developed states. Member countries were initially bound to adhere to all the provisions of the TRIPS agreement by the end of 2006 but Doha declaration granted them an additional 10 years for certain areas particularly the patent rights of pharmaceutical products. This right protects the member states from legal challenges in the import and manufacturing of patent medicines till 2016. Right to Establish Grounds for Medical Necessity An other important feature of the declaration is that it enables the member states to determine the medical needs of its population themselves. In this regard the parties are allowed: 1. To determine what constitutes a medical emergency e.g. outbreak of malaria; 2. To determine its own domestic grounds for granting manufacturing and importing licenses; and 3. To legislate in order to draw a line between the intellectual property rights and human rights. South African Government and Right to Establish Law Now that we have had a look at both the TRIPS agreement and the Doha declaration we are in a position to establish the legal standing of the South African government in the pharmaceutical companies’ case of 1998. Let us have a look at the issue both before and after the Doha declaration. International Law: Before the Doha Declaration When the case was filed in the High Court of Pretoria the Doha declaration was yet to be announced and international intellectual property rights were governed under the old TRIPS agreement. Under the agreement the governments were bound to legislate in conformity with the agreement and not vice versa. So prima facie it looks that the pharmaceutical companies had an edge in the legislation. But when we look deep into the issue we find out that there were even greater legal debates involved in the issue. 1. Pharmaceutical Companies Case vs. National Constitution On domestic front the court was caught in a constitutional quandary. It had to decide whether the law protecting the intellectual property rights was to prevail or granting such right would have been against the fundamental rights of the people of South Africa under the Constitution. (Constitution of South Africa, 1996) There is little doubt the court was in no position to rule against the constitutional mater and in favor of the pharmaceutical companies because the supreme law of the land is constitution and no law can be made contrary to the supreme law. 2. The International Law on Health Practices On the international front the situation was also complex. On the one hand TRIPS was advocating patent rights but on the other hand there were many international organizations and agreements which were advocating health care solutions for the developing world. United Nations (UN) itself had a clear policy on providing basic health facilities to everybody in the world and World Health Organization – the public health arm of the United Nations- was working vigorously for that. There was mounting pressure from international human rights’ organizations particularly Amnesty International. World AIDS Foundation (WAF) was also active in eradicating the disease. Had the case not been withdrawn, there was still every possibility that the pharmaceutical companies would have lost their legal battle against the government even in an international trial. International Law: After the Doha Declaration The very fact that there was no international law to create an exception in patent laws for medicines led to the Doha declaration. The declaration provided a solid legal base in addition to the moral platform already available. Had the pharmaceutical companies’ case been taken into the court after the Doha declaration the chances were even clearer for it to be rejected on following grounds: 1. The Government of South Africa would have had the right to issue compulsory manufacturing licenses to third parties; 2. The government would also have had the right to issue import licenses to third parties; 3. South Africa –being a developing country- would have had certain relaxations under the declaration till 2016 setting free from many obligations; 4. The government would have been able to declare medical emergency –being the worst hit country by AIDS in the world – setting it free from any legal limitations on patent medicines. 5. All international organizations dealing with both trade and health would have been in conformity as compared to the scenario of conflict in pre-Doha era. This would have given more strength to the defense of South African government. Conclusion The above discussion on TRIPS and Doha declaration suggests that the entire community of nations is well aware of the health care challenges in the world and although it fully understands the importance of establishing intellectual property rights, it also understands its role towards basic human rights. The international community has shown its intent to put peoples’ lives above any trade or manufacturing issues but there is a long way to go in this regard. References Substances Control Act No. 101 of 1965, Section 15 (as amended in 1998), South Africa Pharmaceutical Company Law Suit (forty-two applicants) against the Government of South Africa (ten respondents) - Case number: 4183/98, retrieved on December 15, 2009 from http://www.cptech.org/ip/health/sa/pharmasuit.html Declaration on the TRIPS agreement and public health, point 4, adopted on November 14, 2001 retrieved on December 15, 2009 from http://www.wto.org/english/theWTO_e/minist_e/min01_e/mindecl_trips_e.htm Agreement on Trade Related Aspects of Intellectual Property Rights, Section 15, retrieved on December 15, 2009 from http://www.wto.org/english/tratop_e/trips_e/t_agm3_e.htm Constitution of South Africa, Chapter II (Bill of Rights), Section 27 Read More