Important note: Information in this article was accurate in 2003. The state of the art may have changed since the publication date.
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Wall Street Journal - December 10, 2003
Julia Flynn and Mark Schoofs, Staff Reporters of The Wall Street Journal
As part of an out-of-court settlement Wednesday with AIDS activists, Britain's GlaxoSmithKline PLC and Germany's Boehringer Ingelheim Gmbh agreed to expand the licensing of their patented AIDS drugs to three generic manufacturers in South Africa and other African countries.
In return, the South African Competition Commission agreed to drop a year-long probe into whether the companies had overcharged for their AIDS drugs. GSK already had an agreement with a fourth generic manufacturer, South Africa's Aspen Pharmacare.
GSK also agreed to cap royalty fees at no more than 5% of net sales and extend the generic licenses to the private and public sectors. It said it would allow the generic licensees to export AIDS drugs made in South Africa to 47 sub-Saharan African countries. The Competition Commission said it hadn't asked for a fine or administrative penalty against GSK, which is the world's largest maker of AIDS medicines.
By introducing more competition from generic drug makers into Africa's AIDS drug market, the settlement is likely to significantly lower the cost of these drugs -- and broaden access to these costly medicines for Africans infected by HIV, the virus that causes AIDS. Activists expect the price of a combination AIDS drug treatment to drop from around 1,000 rands per month to 110-140 rands per month annually, or around $200-$250 per patient per year.
South Africa has more HIV-infected people than any other country in the world -- 5.3 million, according to the latest health-department estimate, out of a total population of about 45 million. Only a small fraction of HIV-infected South Africans receive antiviral treatments such as AZT and lamivudine. Until now, these drugs have been too costly.
"This will improve access almost immediately to much cheaper medicines," said Zackie Achmat, chairperson of the South African AIDS activist group Treatment Action Campaign in an interview. Working with the U.S.-based AIDS Healthcare Foundation and a broad coalition of other groups, TAC first brought the complaints against GSK and BI to the Competition Commission in September, 2002, in an attempt to challenge the high price of AIDS medicines in South Africa.
A GSK spokesman said the company was pleased to have settled the case. A BI spokesperson wasn't immediately available to comment.
Wednesday's settlement follows an Oct. 16 ruling by the South African Competition Commission that GSK and BI had abused their dominant positions in the market for AIDS drugs by overcharging customers. The Commission also found that the companies had refused to license their patents to generic manufacturers for a reasonable royalty. It announced at that time it would refer the case to the courts. GSK and BI denied the charges.
The same day of that October ruling, GSK announced it had extended its license to Aspen Pharmacare, a South African generic drug manufacturer, to include all countries in sub-Saharan Africa, and that it had dropped the prices of its AIDS drugs for some African countries and organizations. With yesterday's settlement, GSK expanded the total number of its possible generic licensees in South Africa to four from one, while BI has agreed to license its drugs to three generic manufacturers.
GSK said it is in advanced negotiations with Thembalami Pharmaceuticals, a South African joint venture between Adcock Ingram and India's Ranbaxy Laboratories. It also will consider entering into two other possible generic licensing deals for its antiviral drugs AZT and lamivudine. The settlement won't affect the company's earnings, the company spokesman said.
Write to Julia Flynn at julia.flynn@wsj.com and Mark Schoofs at mark.schoofs@wsj.com
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