AEGiS-WSJ: Altruism, Politics and Bottom Line Intersect at Indian Generics Firm

JOHANNESBURG, South Africa -- The South African government has been tossed a hot potato by Indian drug maker Cipla, which asked Wednesday for legal permission to supply the country with low-cost generic copies of patented AIDS medicines.

The gambit by Cipla Chief Executive Yusuf Hamied for a "compulsory license" for eight anti-retroviral drugs used to treat AIDS completely sidesteps the landmark legal battle between South Africa and 39 leading pharmaceutical companies over drug-patent rights. The lawsuit, which opened this week, has been postponed until April 18 to give the drug makers more time to challenge a 1997 law that allows the government wide discretion to limit patent rights in order to import cheaper medicines.

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Cipla's request tests claims by the drug giants that the legislation under dispute is unnecessary because patent law allows the government more acceptable alternatives such as granting compulsory licenses in emergencies to achieve the same goal. But the request could also prove to be a trial of the government's assertions that the drug firms' reluctance to provide affordable medicines is at the heart of its own poor response to the AIDS epidemic sweeping the country. An estimated four million South Africans are believed to be infected with the virus that leads to the disease.

Some critics suggest that the government, which only a year ago was pilloried for its policies questioning the link between HIV and AIDS and dismissing AIDS drugs as "toxins" might be using the lawsuit and the negative publicity it has focused against the drug companies to restore its own tattered credibility. They warned that the government risked slipping back into disrepute if the Cipla opportunity was squandered.

Officials privately say they are worried that should Cipla win its bid to supply the country with cheap AIDS drugs, the government will not have the budget to buy them or distribute them. "We are in real danger that Cipla could open the door on the AIDS drugs barrier in this country and we will not be able to walk through," said one health-ministry official.

Mr. Hamied said so far neither the government nor any of the drug companies that own the patents he plans to copy have tried to contact him.

Mirryena Deeb, the head of the Pharmaceutical Manufacturers Association of South Africa, a trade group party to the lawsuit against the government, told a news conference Thursday that her organization had no plans to challenge Cipla's request. "On the contrary, we welcome it because it proves what we have been saying all along: that we are only against [the 1997 law] and not access to cheaper drugs," she said. However, she added that some PMA members, which include the large international firms, might challenge the application in their individual capacity.

Cipla told the Registrar of Patents at the Department of Trade and Industry in a letter on Wednesday that it was eligible for a compulsory license because the large pharmaceutical companies had abused their patent rights by failing to meet demand "on reasonable terms." Now the government must examine its argument and hear any challenges by patent holders.

But according to Stephen Saad, Chief Executive of Aspen Pharmacare, South Africa's largest generic-drug manufacturer, the government could at any time declare AIDS a national emergency and grant compulsory licenses to make generic AIDS drugs without a challenge. Prepared for such an event, Aspen already has a contract with Cipla's Indian rival Hetero to make three generic AIDS drugs in South Africa. "We're just waiting for the government to give the word. It's just not coming," he said.

Health Minister Manto Tshabalala Msimang says she ruled out the option after a meeting of African Health ministers last year concluded that national emergencies could only be called for a temporary period of time, which is not sufficient to deal with the AIDS problem on the continent.

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