Drug Companies Withdraw Lawsuit Against South Africa

The Pharmaceutical Manufacturers Association of South Africa and 39 pharmaceutical companies today agreed to drop their lawsuit against the South African government over a law that would allow the country to import and manufacture cheaper generic AIDS drugs, the South African Broadcasting Corporation reports (South African Broadcasting Corporation, 4/19). BBC News reports that AIDS activists cheered when the announcement was made after a hearing that "lasted less than a minute" (BBC News, 4/19). In an "unconditional surrender," the drug companies agreed to accept "virtually all of the legislation," but are urging the government to rewrite a "key section" of the law "to clarify and limit the circumstances in which it can grant compulsory licenses for third parties to manufacture patented medicines at a lower price." Britain's Guardian reports that South Africa has not indicated whether it will "give ground" on this issue, but the government has already said that its "primary interest" is not manufacturing copies of patented drugs, but importing and manufacturing generic drugs (McGreal, Guardian, 4/19). Under the agreement, South Africa "promise[d]" that the implementation of its 1997 Medicines and Related Substances Control Act would comply with the rules of the World Trade Organization. The Wall Street Journal notes that this was a "promise the government has agreed to make for years, but the industry had long insisted wasn't enough" (Block/Harris, Wall Street Journal, 4/19). The drug companies also agreed to pay costs incurred by the South African government related to the lawsuit (South African Broadcasting Corporation, 4/19).

With today's withdrawal of the suit, the pharmaceutical companies "will stave off another public relations disaster," the Guardian reports. The industry has faced a "groundswell of public and government opposition," which caused some of the "largest firms" involved in the case to "rethink their strategy." In addition, if the case continued, the companies faced having to reveal "some of their most closely guarded business secrets," such as pricing policies, profit levels and the source of funding for AIDS drug research (Guardian, 4/19). NPR's Brenda Wilson reports on "Morning Edition" that the "industry realized that this was a losing proposition. [South Africa] is a very small market ... less than 2% of their [total AIDS drug] market. ... I think they saw that even if they won the case, their image would suffer in the long term" (Wilson, "Morning Edition," NPR, 4/19). The Guardian reports that a "split" had developed between the Pharmaceutical Manufacturers' Association and some of the larger firms in the case, who now say that the case "should never have been pursued" and were "disturbed at the content of some submissions by PMA lawyers." For example, the trade group had argued that "unless there were financial returns there was little incentive for drug companies to develop new AIDS treatments" (Guardian, 4/19). In an effort to stave off increasing damage to their "collective image," five companies that manufacture AIDS drugs -- Merck & Co., GlaxoSmithKline, Bristol-Myers Squibb, Boehringer Ingelhiem and Roche -- "pushed hard for a settlement." The remaining companies "reluctantly agreed to go along" (Wall Street Journal, 4/19). The Guardian notes that the drug industry "has ultimately achieved the very thing it tried to prevent -- encouraging governments across the developing world to use the law to obtain more affordable drugs" (Guardian, 4/19). The case "will go down in history ... as one of the great corporate PR disasters of all time," and the "hard lesson that the big pharmaceutical companies have been taught ... is that there can be no global marketplace without a world sense of right and wrong" (Denny/Meek, Guardian, 4/19).

The trial in South Africa has prompted several news reports in the United States and abroad. To listen to a report on the trial aired yesterday on NPR's "All Things Considered," enter http://www.npr.org/ramfiles/atc/20010418.atc.17.ram into your Web browser. NPR's Brenda Wilson reports on the withdrawal of the lawsuit on this morning's "Morning Edition." To listen to the report, which will be posted three hours after the last show on the West Coast, go to http://search.npr.org/cf/cmn/cmnpd01fm.cfm?PrgDate=04/19/2001&PrgID=3. In addition, the South African Broadcasting Corporation features a television news clip on the trial. To view this clip, go to http://www.sabcnews.co.za/SABCnews/video_ram/0,1573,3719,00.ram. Note: You must have RealPlayer to listen to these clips.