South Africa

Intellectual Property Protection

Until November 23, 1997, South Africa had a relatively modern patent regime, 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, if implemented, would 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 which while not actionable through WTO dispute settlement procedures, poses a serious threat to the viability of American pharmaceutical investment in South Africa. It may be worth noting that implementation of a parallel import system would likely violate other TRIPS obligations, including data exclusivity (Article 39.3), and the obligation to provide effective remedies to prevent and deter infringement (Article 41 et seq.).

In 1998, over 40 pharmaceutical companies operating in South Africa, and the South African Pharmaceutical Manufacturers Association (SA PMA) filed a legal challenge to the Medicines Act before the Constitutional Court in South Africa, a new, post-apartheid institution. Both sides have filed briefs before the Court, but the industry has made clear its preference for a negotiated, mutually acceptable solution to the dispute. In June 1999, South Africa held its second free national elections, as a result of which a new Cabinet was appointed. Via the SA PMA, the industry immediately made overtures to the new Government, for the purpose of reaching a mutually acceptable solution to the dispute over the Medicines Act. As a part of the ongoing dialogue between the industry and the Government, both parties to the litigation have agreed to a delay in the schedule of the legal challenge.

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 in South Africa, including patented, new-technology medicines as well as older, multi-source (generic) products, are among the lowest in the world.