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The South African Pharmaceutical Sector

By Alexic Apostolidis
Posted: 17th November 2014 09:25
The South African Pharmaceutical sector is a hotbed of change, in particular the patent law landscape.  The demand for change is driven, largely, by activist organisations, both local and international, who have painted a picture to the effect that it is the South African patent system that is responsible for stifling access to drugs.  As the drive to influence policy and law continues, recent case law suggests that the courts are taking an objective approach and are upholding the law as it stands.
In September 2013, the Draft National Policy on Intellectual Property of South Africa was published in the government gazette (No. GG 36816) (“the Policy”) and although it was framed to address various intellectual property issues and policies, a major focus of the Policy is to secure access to drugs.  The focus of the policy is clear from statements such as:
“… The IP System is one of the factors that directly and negatively/positively impacts on access to healthcare … and access to medicines/drugs in developing countries.”
“… IP protection regimes must not contradict public health policies and the two should be balanced… Developing countries could adopt IP policies in their legislation that limit the extent of patenting and facilitate the introduction of generic competition …”
(pages 23, 24 and 39)
Some of the objectives of the Policy relate to the amendment of the Patents Act to be amenable to issues related to access to public health and to prevent “weak” patents from being granted as these stifle access to public health. 
As part of the proposed reforms it is proposed, inter alia, that substantive examination be introduced.  South Africa currently has a deposit system whereby patent applications are only examined for compliance with formalities. 
The introduction of substantive examination is to be welcomed provided that it is carried out correctly, having regard to the infrastructure and resources required, and in compliance with South Africa’s obligations under The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) of which South Africa is a signatory.  Importantly, discrimination between sectors, e.g. the pharmaceutical sector verse the car manufacturing sector verse the mining sector and the like, cannot take place (Article 27 TRIPS) and thus all patent applications, regardless of the sector to which they relate, must be examined.  Further, examination must take place within a reasonable period of time in order not to curtail the period of protection given for a patent (Art 62 Trips) which is particularly important in the pharmaceutical sector because the effective patent protection for a drug is actually five to seven years out of the 20 year period of patent protection due to clinical trials, regulatory and marketing approval requirements. 
Unfortunately the Policy is silent on the fact that the majority of foreign filed patents (in the pharmaceutical and other sectors) which are kept in force are generally amended to be in line with their counterpart patents which have undergone thorough examination in major jurisdictions such as the EU and the USA.  It also fails to take cognizance of the fact that a heavy onus is placed on patentees in South Africa when it comes to enforcing a patent.  This is because if an overly wide or weak patent is enforced, it will be open to revocation and under South African patent law, a patent that is only partially valid (i.e. some claims are valid while others are not), cannot be enforced, unless the invalidity is amended away.
The policy also seeks to limit the scope of protection offered by pharmaceutical patents, such that patents should not be granted for methods of treatment, surgical and diagnostic methods, all of which are already excluded from patentability, and new uses and the like which result in “ever greening”.  The Policy regrettably does not take into account the notion of incremental development, which, given the state of technology in the world, is rife through all sectors.  Take the mobile telephone sector for example.  It also does not take into account the fact that new formulations, isomers, crystal forms, may likely improve the efficacy of a drug or simply patient compliance and that the patentability thereof is adequately capable of being addressed by the ordinary requirements for patentability, namely novelty, inventiveness and industrial applicability.
Mechanisms for access to drugs are also addressed by the IP Policy although it is unclear as to the exact nature of these mechanisms since compulsory licensing is already available under the Patents Act No 57 of 1978 (Section 56) and in terms of the Competition Act No 89 of 1998 while Section 15C of the Medicines and Related Substances Act allows for parallel importation in certain circumstances in order to ensure supply of affordable drugs.  Finally, pricing mechanisms are already present in the pharmaceutical sector, namely single exit pricing (i.e. the price set by the manufacturer or importer of a medicine combined with the logistics fee and value added tax); benchmarking and excessive pricing mechanisms are provided for under the Competition Act.  Unfortunately these various options receive little to no attention in the IP Policy.
Dovetailing with the Policy in respect of compulsory licensing is also the Promotion and Protection of Investment Bill (Notice 1087 of 2013) which, through Section 8, states that the issuance of a compulsory license in respect of an intellectual property right does not constitute an expropriation of such rights. 
Perhaps more sadly, in considering the debate relating to access to drugs and patents, little attention is given to the facts that access to new drugs require innovation and the protection thereof and that there are other more important and damaging barriers hampering access.  These specifically concern the lack of infrastructure and distribution channels, patient education, hospital costs, local manufacturing and an effective regulatory system.  It is hoped however that the current health sector enquiry being conducted by the South African Competition Commission will expose and deal with some of these issues and that perhaps a leaf can be taken out of China’s book where it appears that a pro intellectual property policy is in place to attract foreign investment. 
From a timing perspective, the Policy is still in its draft form, and its final form, taking into account a barrage of criticisms both locally and internationally, including the risk of placing international trade relations under stress, is rumored to be making its way to the South African Parliament before the end of 2015.  Of course, legislative amendments stemming from the finalised policy are likely to appear on the horizon within three to five years or more. 
The impact of the Policy on the enforcement of patents in the pharmaceutical sector, has, in the writer’s experience, had little effect.  The courts, most noticeably through the Supreme Court of Appeals, are applying the law in an objective fashion although “public interest” has recently been accepted as a factor in the balance of prejudice enquiry during interim injunction proceedings.
In conclusion, while it is a healthy exercise to review intellectual property laws, and to strive for greater access to public health, and given that it is early days yet, it is hoped that a balanced policy and approach will be established that upholds South Africa’s international commitments, fosters investment confidence in the country and encourages better and stronger trade relations on an international basis.
Mr Apostolidis, a partner in the patent litigation practice of Adams & Adams and Head of the Competition Law Group, holds a Bachelor of Science (chemistry and law) and a Bachelor of Laws (cum laude) from the University of the Witwatersrand (WITS).  He also holds a postgraduate degree in European Competition Law (with merit) from King’s College, University of London.  Mr Apostolidis is well experienced in all aspects of patent law but specialises, inter alia, in patent litigation in the life sciences sector, representing originator pharmaceutical companies.  He has been cited in peer review publications such as IAM’s “Patent 1000 2014: The World’s Leading Patent Practitioners”; “Who’s Who Legal – Patents 2014” and “Finance Monthly Global Awards 2014 – Litigation Lawyer, South Africa”.
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