South Africa’s patent system is inefficient and anti-poor, and blocks access to affordable medicines for illnesses like TB, depression, diabetes and cancer, writes James-Brent Styan.
In The Dirty Secrets of the Rich and Powerful: Exposing the Dark Side of Capitalism, James-Brent Styan explores the phenomenon of global inequality and unveils the secrets of influence and power dictating people’s lives, asking: are companies and billionaires more powerful than governments?
Styan revisits the collapse of Steinhoff following the death of Markus Jooste, investigates how company shares get manipulated, and unpacks the tax games the powerful play. The Dirty Secrets of the Rich and Powerful asks difficult questions about why medicine is so expensive and the risks of renewable energy. The book is an exploration of why growing inequality between rich and poor should concern all of us.
Styan’s first book, Blackout: The Eskom Crisis, published in 2015, exposed the state of Eskom and warned about the future of rolling blackouts. His 2018 exposé, Steinhoff: Inside SA’s Biggest Corporate Crash, was a number-one bestseller in South Africa. The Dirty Secrets of the Rich and Powerful is his fifth non-fiction title. Read the excerpt.
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South Africa’s Healthcare System
South Africa has a two-tiered healthcare system, comprising a public and a private sector. The private sector caters to 16 per cent of the population (roughly 7 million people) who have access to medical aid and can afford private healthcare. The private healthcare sector in South Africa spends R33.2 billion on medicines per year, which equates to 84 per cent of total pharmaceutical spend in the country. The private market is serviced by 130 manufacturers and importers supplying 5,000 different product lines.
The public healthcare sector, which serves the healthcare needs of 84 per cent of the population, only accounts for 16 per cent of the total annual spend on pharmaceuticals. Patients in this sector have access to a much more limited number of 2,400 product lines. The main reason is cost.
Also, the private healthcare system has access to drugs that are outside the budget of the government, which funds public healthcare. This is where patents have a huge impact. For example, in 2014, spending on patented drugs in South Africa totalled R22.1 billion, yet patented prescription medicines made up just 36 per cent of sales volume. Spending on generic drugs, which made up 64 per cent of sales volume, totalled R12.85 billion. These numbers suggest that, in South Africa, generics are sold in far greater quantities compared to patented prescription drugs, but the money spent on patented medication far exceeds the cheaper generic alternatives.
In 2017 in the private sector, the weighted average price of a non-generic medicine, excluding VAT, was R134.63, compared to R59.75 for a generic product. It’s no wonder that patients are increasingly choosing generics over patented medicines. Large companies have cottoned on to the trends and, in many instances, have now started creating and marketing both originator and generic products of their own. Instead of allowing space for competitors, many companies whose patents have expired have gone so far as to establish generic divisions within their own businesses.
The impact of the high cost of patented medication in South Africa was well illustrated by the Cancer Alliance in their 2021 report. ‘Despite having some of the foremost oncology experts in the world, this report shows that scientific progress in the management of different types of cancer, does not always result in immediate or affordable treatment for the majority of cancer patients,’ noted Fatima Hassan, head of the Health Justice Initiative, in her foreword to the report.
The public and private health sectors, policymakers, medical-scheme administrators and drug-company executives are failing patients with cancer in South Africa. Most patients cannot afford the medicines and treatment because they are priced for first-world markets and often excessively so – without any penalty or repercussion. Some also enjoy extended periods of exclusivity, which means they have little or no competition.
This is often due to the state’s inexplicable deference to an industry that relies on a patent system, protecting the market at all costs, and long-term exclusivity and patent rights that government grants too favourably, and often unfairly, to multi-national and local companies. These companies then amass monopolies accompanied by unjustifiable profit margins.
The impact of these activities is so dire that countless South Africans from all walks of life have gone so far as to travel to places like India to smuggle back cheaper medicines for their loved ones, risking hefty fines and incarceration.
Patent Problems
South Africa’s patent system is inefficient, under-resourced and anti-poor. It appears that the recently formed Department of Trade, Industry and Competition (DTIC) and the Companies and Intellectual Property Commission (CIPC) – the agency within the DTIC that manages patents in South Africa – are unable to identify, let alone prevent, patent abuses and practices such as evergreening. South Africa grants a far higher percentage of patents than virtually any other comparable country in the world. On average, South Africa grants about 93 per cent of patent applications it receives, compared to 61 per cent in the US, 53 per cent in Mexico, 51 per cent in the European Union and 29 per cent in Japan.
The figures from India and Brazil are even lower: India approves around 19 per cent of all patent applications and Brazil only 14 per cent. Large pharmaceutical companies can, and do, exploit the CIPC’s inability to verify, examine and review patents. The DTIC and the CIPC have themselves acknowledged the weaknesses in the system, which are being addressed through the drafting of a new National Intellectual Property Policy. In the meantime, however, patents will continue to act as a barrier to more equitable access to affordable medicines for illnesses such as tuberculosis, depression, diabetes and cancer. The following are just two examples.
Lenalidomide is a life-saving medicine used to treat multiple myeloma, a form of blood cancer. In South Africa in 2019, it cost a whopping R729 372 per patient for a full year’s course. In India, a year’s course sold by a generic supplier cost just R28 476, less than 4 per cent of the South African price. The generic is not available in South Africa, not even for import, because the company that holds the patent for lenalidomide, Celgene, holds 32 secondary patents on the medication in South Africa. These secondary patents prevent any generic forms of lenalidomide from being sold in South Africa until at least 2028, which is 30 years after the initial patent was granted.
‘These secondary patents were granted because South Africa does not actively examine patent applications to ensure only genuinely new and innovative technologies are granted patent monopolies,’ said Salomé Meyer of the Cancer Alliance.
Another example is bendamustine, a chemotherapy medication used in the treatment of chronic lymphocytic leukaemia, multiple myeloma and non-Hodgkin’s lymphoma. In 2021, a full course of bendamustine cost R50 616 per person in South Africa, while a generic version in India cost R9 024. Due to South Africa’s outdated patent laws, a cheaper generic alternative will not be available in the country until 2031, again almost 30 years after the original patent was granted to Astellas Pharma.
One way that the state has tried to soothe the public when it comes to these massive discrepancies is through the South African Health Products Regulatory Authority (SAHPRA), which is tasked with regulating (monitoring, evaluating, investigating, inspecting and registering) all health products and clinical trials in South Africa. In some instances, when SAHPRA approves a medicine for use in South Africa, it does so on the condition that it also be made available in the public health sector at a cheaper price. In practice, however, all this means is that a limited amount of the patented medicine is made available to the public sector at the reduced price. When that stock is finished, it is no longer available. It is still freely available in the private health sector, but at its higher price. As an example, in 2019, one injection of Zoladex, a type of hormone therapy, cost R450 in Cape Town’s Tygerberg Public Hospital. The same injection cost R4 500* in the private sector.
The Cancer Alliance says that many cancer patients in South Africa are being left with no choice but to forfeit treatment in what they describe as ‘a rather startling, very non-fictional case of “your money or your life”’. South Africa should stop granting patent monopolies for every reformulation or new use of an existing medicine, and instead of emulating countries in Europe and North America, where greater protection is provided to patented medications (leading to higher prices), should look to its BRICS partners, in particular India and Brazil, who are driving a different route when it comes to patents.**
Rebalancing the scales
In 2008, cabinet mandated the then Department of Trade and Industry to lead the development of a national Intellectual Property Policy. When nothing happened, in November 2011 the Treatment Action Campaign, SECTION27 and Doctors Without Borders launched a campaign to try to get the government to address the shortcomings in South Africa’s patent laws. They called the initiative Fix the Patent Laws.
The group lobbied endlessly and grew to include 40 different organisations representing a range of diseases. The campaign focused on patent-law reform, specifically:
- stricter patentability criteria to combat patent evergreening;
- stricter examination of patent applications to ensure the patentability criteria have been met prior to the granting of patents;
- proper implementation of patent-opposition procedures; and
- the use of more workable procedures for granting compulsory licences.
No doubt feeling the pressure, in 2013 the DTI presented a draft policy to cabinet, which was approved. Four years later, in 2017, the DTI released the highly anticipated Draft National Policy on Intellectual Property (Phase 1) for public comment. Included in the draft reforms was a proposal to move away from a depository patent system, whereby patents are automatically granted when fees are paid, towards a ‘substantive search and examination’ system, whereby patentability criteria are checked prior to the granting of 20-year monopoly patents. If this were passed into law, the effect would be to reduce unsubstantiated, superficial patent applications, prevent tricks like evergreening and create a more open market. By allowing more generics to compete in the market, the cost of medicines would decrease. The drafters seemed to understand that access to generic medicines is in the public interest.
In 2018, cabinet approved the draft policy. And then … nothing. More than five years later and still no relevant legislation has come before Parliament. It seems the state is uninterested in reducing the cost of healthcare for the poor. More than 20 years ago, ARVs were being called Lazarus drugs because they could take people ‘from a deathbed to working’. If the problems in South Africa’s patent laws can be addressed adequately and with the interests of the poor in mind, there is every chance we will see more such Lazarus effects in the public health sector. DM
* The cost in the public sector was 10 per cent of the cost in the private sector.
** BRICS is an intergovernmental organisation comprising Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran and the United Arab Emirates.
The Dirty Secrets of the Rich and Powerful by James-Brent Styan is published by Penguin Random House SA (R290). Visit The Reading List for South African book news, daily – including excerpts!