PTC FORUM : PUBLICATIONS

SOUTH AFRICA - USA (PATENTS / COMPULSORY LICENSING)

Innovation and Access: Compulsory Licensing and HIV/AIDS Drugs

University of Illinois Journal of Law, Technology & Policy, No 1, 2001

Theodore C Bailey

This article takes as its starting point the dispute between South Africa, on the one hand, and the United States and the Pharmaceutical Research and Manufacturers of America, on the other. The immediate cause of the dispute was the South African Medicines and Related Substances Control Amendment Act of 1997, which legalized the production or importation of low-cost, generic forms of HIV/AIDS drugs. The law was passed in response to the serious epidemic in Soth Africa and to the fact that existing drugs were beyond the means of the great majority of sufferers, of whom there were 4.1 million in the country's total population of 21 million. The author points out that the dispute raises the problem of reconciling serious social needs and the essential protection of innovation and encouragement of investment in research. He reviews the legal position, with particular reference to the provisions of the TRIPS Agreement and to the different interpretations of the limits placed by TRIPS on the Member States to grant compulsory licences for such things as pharmaceutical patents. He emphasizes the substantial risk element in the development of specific drugs and the substantial failure rate in drug research. He points, however, to the monopolistic character and behaviour of the principal suppliers of HIV/AIDS drugs and concludes that South Africa's attempt to encourage the compulsory licensing of those drugs is prompted by the fact that the supply behaviour of the pharmaceutical firms "does not fully approximate the behaviour one would expect of competitive firms supplying these drugs despite the expected demand for these drugs being highly elastic". The author criticizes the views of, for example, Alan M Fisch, who stated that, in assessing returns on investment, pharmaceutical companies would note the high likelihood that developing a breakthrough pharmaceutical would result in a net loss as a result of compulsory licensing. The author prefers the views of, among others, Pankaj Tandon, who argued that the socially optimal patent was one of indefinite duration, in which compulsory licensing was allowed. The article ends by suggesting that compulsory licensing could offset the monopolistic character of the market and create a more favourable balance in overall social costs, without substantially jeopardizing the current trend towards rapidly increasing investment in this sector. [20056]