Mail & Guardian (Johannesburg) - December 8, 2006
Lloyd Gedye

Antiretrovirals are being procured by the South African government for only 5% of the price it was paying for them in 2001. This amazing decrease in ARV prices is a result of the voluntary licences granted by multi-nationals to generics manufacturers.

South African company Aspen Pharmacare currently sells a triple therapy generic ARV treatment consisting of 150mg Lamivudine, 40mg Stavudine and 200mg nevirapine to government for R97,27 per person a month.

According to the first edition of the report Accessing ARVs: Untangling the Web of Price Reductions for Developing Countries, by Medecins sans Frontieres, the cheapest price for which the government could have procured the same triple therapy treatment in 2001 was $285 or R2 012 at current exchange rates.

The 150mg Lamivudine, 40mg Stavudine and 600mg Efavirenz triple therapy treatment, which two-thirds of those on treatment in South Africa use, is currently procured for R270, while in 2001 it cost $620 or R4 377.

A number of factors, such as increased competition, increased volumes and cheaper ingredients, have led to the drastic decreases in ARV prices, but without the voluntary licences granted to generics manufacturers, this would not have translated into lower prices for the consumer.

"We went to multinationals and got them to agree to give us a licence," says Aspen senior executive Stavros Nicolaou. "We were quite innovative, choosing to take the less adversarial route and limiting legal complications."

Jonathan Berger of the Aids Law Project says Aspen moved very early to acquire voluntary licences, but the licences often included very onerous conditions. Nicolaou says that, in the early stages of voluntary licences, most multinationals received a royalty percentage, but they have lately waived this. He says the multi¡nationals benefit from granting the voluntary licences because they secure access to a market that has a legal framework for the granting of licences and African partners that understand African conditions.

Berger argues that the South African government should have done more to force multinationals to issue compulsory licences. "Our patent laws are too strict and offer protection way above what is required by international laws," he says. He says local and international civil society deserve credit for the pressure they brought to bear on governments and pharmaceutical companies.

Nicolaou agrees, but also points to the work being done by the Clinton Foundation in bringing down the costs of the active pharmaceutical ingredients (API), which make up 60% to 70% of ARVs' cost.

Aspen does not manufacture its own APIs, importing them from India and then manufacturing the drugs here.

Nicolaou says the Clinton Foundation played a huge role in reducing the prices of ARVs by negotiating forward discounts on APIs for generic manufacturers based on large volume increases, which allowed Aspen to offer ARVs at much lower prices.

"At R3 000 there is no way a rural South African could get a sniff of ARVs," says Nicolaou. "At R160 it is within reach of Trevor Manuel's budget ... It is a wonderful success story about how humanity has come together," says Nicolaou. "If they were to sell these drugs at European prices, people would die."

Aspen may be a success story, but the competition is hot on its heels, with Indian companies such as Cipla offering ARVs at even lower prices. Credit Suisse Standard Securities analyst Julien Veron says in a recent forecast report on Aspen that the pharmaceutical company is expected to come under pressure in the domestic state tender market.

Veron says the rollout of ARVs by government is expected to accelerate, which will benefit Aspen up until 2008 because of its lion's share of the last state ARV tender. However, Veron predicts that Aspen will lose some market share in the next state tender.

Berger says the reason Aspen got a large portion of the tender was because, at the time, Cipla did not have licences. He says that the Indian companies now have local subsidiaries such as the local player Enaleni Pharmaceuticals, which is expected to be awarded a sizable share of the next tender.

Aspen is likely to continue to do a healthy business supplying the private sector and other African countries. In its most recent annual results, Aspen had R80-million in revenue from government business, R83-million from supplying the private sector and R100-million from other African countries.

Veron says he expects Aspen to secure strong growth in the ARV tender markets in the rest of Africa and says it is well placed for the R120-million state tender for TB drugs due to be launched in 2007.

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