Competition law has again worked to fight a bad drug patent, but we need other solutions

By Fatima Hassan and Leena Menghaney for Spotlight

2 Sep 2024

A Competition Commission probe recently resulted in a patent on an important tuberculosis medicine being dropped in South Africa. Twenty years ago, a similar Competition Commission case resulted in a settlement that helped drive down the prices of several antiretrovirals, thereby helping to set the stage for the country’s HIV treatment programme. Spotlight connects the dots between the two landmark cases and maps out what has and has not changed over the past two decades.

In the late 1990s and early 2000s, South Africa faced a major uncontrolled Aids epidemic, worsened by state-sponsored Aids denialism. South Africa was at the epicentre of a global epidemic, with hundreds of thousands of people getting sick and dying, needlessly, because lifesaving antiretroviral medicines were out of reach.

This was in the main because of the Mbeki government’s deadly science denialism denying public sector patients antiretrovirals and the high cost of some of these medicines, which at the turn of the century was available in the private sector, but only for the very rich or medically insured. The private sector price for the combination of three antiretrovirals needed by most people living with HIV was exorbitant.

This was because of patent monopolies held at the time by multinational pharmaceutical companies, particularly GlaxoSmithKline (GSK) and Boehringer Ingelheim (BI). In essence, people in South Africa living with HIV had to beg to live – by seeking donations and charity or pressuring their respective medical schemes to provide coverage. Meanwhile, lifesaving antiretrovirals were generally available in the Global North and in some parts of the Global South where governments like those in Thailand and Brazil had taken action to reduce prices.

Hundreds of thousands of people in South Africa died prematurely because they did not get access to these medicines in time.

The landmark Hazel Tau case

Looking for a way to challenge the high prices of key antiretrovirals, activists turned to South Africa’s newly revamped post-apartheid competition law. In September 2002, the Treatment Action Campaign, Hazel Tau, a woman living with HIV and several others lodged a complaint with the country’s Competition Commission. They alleged that the price that GSK and BI were charging for important antiretrovirals was excessive and anti-competitive, undermining not just Competition Law but also the right to health as enshrined in the country’s still fairly new Constitution.

The Competition Commission agreed to investigate. Several months later, it announced that there was a prima facie case of excessive pricing and that they would be referring the matter to the Competition Tribunal (the next phase of a complaint to the Competition authorities). Almost immediately after that announcement, TAC was approached by GSK and BI to “settle” the matter. This meant there would be no public hearings and the companies would not have to defend their pricing decisions in the dock.

The terms of the settlement, negotiated by the TAC’s legal team, mirrored what the TAC had publicly demanded at the beginning of the case. Most importantly, GSK and BI agreed to grant voluntary licences to several generic manufacturers that would allow them to make and sell the antiretrovirals in question. It was this generic competition that would drive down the prices of antiretrovirals in the years that followed.

Even though the Competition Commission has jurisdiction only in South Africa, the licences included many other African countries, which meant those countries could also benefit from the generic competition and lower prices. The settlement (including the terms of the voluntary licences) was agreed to by the Competition Commission, made an order and publicly announced, leading to the conclusion of the complaint.

The case, which came to be known as the Hazel Tau case, would in the years to come be recognised as one of the foundations that made large HIV treatment programmes possible in South Africa and other African countries. Despite this victory, the ongoing effects of Aids denialism meant that it would in reality be several years before the more affordable generic antiretrovirals would be made widely available in South Africa.

Twenty years later, the spotlight is on TB drugs

HIV has not been the only health crisis to affect SA. According to the World Health Organization (WHO), tuberculosis (TB) is one of the leading infectious causes of death globally, and drug-resistant TB (DR-TB) remains a public health crisis. The WHO estimates that around 304,000 people fall ill with TB in South Africa per year, and it claims over 50,000 lives, which means it remains one of the country’s top killers. While TB rates are slowly declining, there is concern that rates of drug-resistant forms of TB (DR-TB) are increasing. DR-TB requires newer, more expensive treatments.

To put it plainly, South Africa has some of the highest TB and DR-TB incidence rates in the world and it is mostly up to the state to care for people with TB in the public healthcare system.

As with HIV medicines 20 years ago, several of the most important DR-TB medicines are still under patent and the pharmaceutical companies that hold the patents are charging high prices or seeking to endlessly extend their patents. As a result, governments wanting to provide the treatments have had to pay up or leave their people to die.

Part of the problem is patent evergreening. Patent evergreening refers to the abusive practice of extending a patent monopoly on a drug by seeking additional patents on minor modifications or improvements – thus extending a company’s monopoly on a medicine beyond the 20 years granted for the initial patent. It is a well-documented problem in South Africa and elsewhere and extends to other areas of medicine such as treatments for cancer and diabetes.

What we are left with is a wastage of key resources in a country beset with high inequality levels: the national fiscus often overpays for life-saving TB medicines, using public money, because otherwise patients living with TB will die, needlessly.

The primary patent on bedaquiline expired globally in July 2023, but a secondary patent (on the fumarate salt form of the drug) would only expire in 2027 in the places where it was granted.

That changed with the Competition Commissioners’ bold decision to initiate a complaint against Johnson & Johnson on bedaquiline in mid-September 2023, just a week before a major UN meeting on TB.

Significantly, the initiation of an investigation into a multinational corporation’s patenting strategy (the ever-greening conduct), not only the excessive price charged, was groundbreaking and unprecedented for South Africa, and a new Competition Commission investigation into another key TB drug, delamanid, suggests a welcomed broader programme to review meritless patenting. It could pave the way for similar investigations into other TB medicines.

In a surprising move, barely two weeks after the commission announced its investigation, Johnson & Johnson publicly stated that it would not enforce its secondary patents in 134 low- and middle-income countries, including South Africa. As in the Hazel Tau case, pressure exerted by the Competition Commission had resulted in the door being opened in South Africa for generic competition.

If the commission had not initiated the investigation, Johnson & Johnson would have maintained its patent monopoly in South Africa until 2027 – an extra four years – preventing the timely entry of more affordable generic versions of the drug.

Before the commission’s announcement, the National Department of Health was paying R5,577 for a six-month course of bedaquiline. In comparison, the Global Drug Facility (GDF – a procurement mechanism for poor countries) priced it at R2,446 for eligible countries. South Africa’s procurement laws preclude it from buying from the GDF, something we believe Johnson & Johnson took advantage of. By November 2023, as a result of the commission’s investigation, the revised price for South Africa was essentially the same as the GDF price at R3,148 (including VAT and logistics).

We believe Johnson & Johnson capitulated because its secondary patents were rejected in India and Brazil earlier in 2023 and because there was global scrutiny over its pricing practices and patenting conduct. There was a real possibility of regulatory scrutiny into its patenting practices in South Africa, something it clearly wanted to avoid.

Like the patent rejections in India and Brazil, this groundbreaking local victory has had an impact globally. But a key problem remains: the outdated patent system we have in South Africa is leaving the door wide open for evergreening patents.

The Competition Commission cannot be expected to investigate every single instance after the fact. The only sustainable solution is not to grant evergreening patents in the first place. As we pointed out, this solution has already been government policy for six years and a Bill that would give effect to it has been drafted, but the process has since stalled and the Bill has not yet been sent to Parliament.

In the meantime, the bold decision by the commission to investigate Johnson & Johnson, soon after the Covid pandemic contract ‘’bullying’’ disclosures (incidentally also involving Johnson & Johnson), underscores the importance of effective regulatory investigation and oversight in combating excessive pricing and abusive evergreening practices that block competition.

They also demonstrate the power of activism and the law in challenging unfair pharmaceutical practices to promote global health equity. DM

Fatima Hassan is director of the Health Justice Initiative. Leena Menghaney is global IP adviser at the Medecins Sans Frontieres’ Access Campaign.

This article was first published by Spotlight – health journalism in the public interest. Sign up to the Spotlight newsletter.

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South Africa

The landmark Hazel Tau case

Twenty years later, the spotlight is on TB drugs