South Africa

Intellectual Property Protection

Until November 23, 1997, South Africa had a relatively modern patent law, providing full product patent protection for pharmaceuticals. Regrettably, on November 23, the Government adopted a new law, the "Medicines and Related Substances Control Act Amendments," that seriously undermine the terms of intellectual property and patent protection for pharmaceuticals in South Africa. Specifically, Article 15C of the new law states that:

That the Ministry of Health may notwithstanding anything to the contrary contained in the Patents Act, 1978 (Act No. 57 of 1978), determine that the rights with regard to any medicine under a patent granted in the Republic shall not extend to act in respect of such medicine which has been put onto the market by the owner of the medicine, or with his or her consent;

This clause, 15C(a), would appear to allow the Department of Health to revoke all pharmaceutical patents valid in the Republic of South Africa, "notwithstanding anything in the Patents Act," at ministerial discretion. This is a clear violation, we believe, of both domestic South African law and South Africa's WTO TRIPs obligations. Furthermore, the new law, at 15C(b) allows for the parallel importation, a violation of TRIPs Article 28, and a serious threat to the viability of American pharmaceutical investment in South Africa.

Price Controls

The law also implements, at Section 22G, for the first time in South Africa, a system of price controls. Based on industry analysis not disputed by the Government, prices for pharmaceuticals, including patented, new-technology medicines as well as older, multi-source (generic) products, are among the lowest in the world.

Potential Exports/Foreign Sales

As the new law has just been enacted, it is premature to estimate the potential loss to American investors and exporters. Numerous PhRMA member companies have, however, already indicated that new investment in South Africa, in some cases valued at more than $50 million, have been suspended as a result of the new legislation.