Wall Street Journal - April 18, 2001
Robert Block and Gardiner Harris, Staff Reporters

JOHANNESBURG, South Africa -- Under international pressure from AIDS activists, the world pharmaceutical industry has agreed to drop a suit against the South African government almost entirely on the government's terms, according to a senior person involved in the industry side of the negotiations.

The agreement, which is expected to be announced in court Thursday, includes a promise from the government that its implementation of the disputed medicines law would comply with the rules of the World Trade Organization. It's a promise the government has agreed to make for years but the industry had long insisted wasn't enough.

Companies that make AIDS drugs insisted that fighting the case was causing more damage to their collective image than a win could possibly recoup, said the person involved in formulating the industry's stance during the trial and negotiations. So those companies -- Merck & Co., GlaxoSmithKline PLC, Bristol-Myers Squibb Co., Boehringer Ingelheim GmbH and Abbott Laboratories -- pushed hard for a settlement. The 35 other companies party to the suit don't make AIDS drugs. They reluctantly agreed to go along, the person said.

Filed in February 1998, the suit challenged a South African law that made easy the seizure of drug-industry patents so that cheap knock-offs could be made or imported into the country without the permission of the patent holders. Filed when the scope of the AIDS disaster in Africa was less widely known, the suit has since been portrayed by activists as insensitive and driven by greed.

In the back-and-forth between the industry and South African President Thabo Mbeki, the industry's initial draft of the settlement promised help "to run partnerships on AIDS programs," this source said. But President Mbeki faxed back a change that crossed out AIDS and inserted the words, "communicable diseases." It was a change that chilled some in the industry, since it might have grown out of the president's oft-cited belief that AIDS is simply a disease of poverty, not of infection with the HIV virus.

The agreement was originally expected to be announced Wednesday, but the government insisted that all 39 plaintiffs formally sign it. That sent local company representatives scrambling to get legally binding powers of attorney from headquarters far away.

Government representatives wouldn't comment on the talks. A spokesman for Merck said the agreement wasn't an industry capitulation. "The most important part is getting beyond divisiveness, and with the government agreeing that the law will be ... compliant [with world trade agreements], we do that," said Jeffrey Sturchio.

GlaxoSmithKline and Bristol declined to comment.

With the close of the suit, attention now turns to government efforts to make widespread use of AIDS drugs. On Wednesday, after a seven-month delay, the country's drug regulatory body, the Medicines Control Council, approved the drug Nevirapine to help prevent HIV-infected mothers from passing on the virus to their infants during childbirth. The holdup in approving the drug had led to accusations by AIDS activists that the government lacked the political will to use antiretroviral drugs.

In July last year, Boehringer offered to supply Nevirapine to the South African government free of charge for five years. Even though the drug is free, it is still not certain that the government will take up the offer.

According to health-ministry officials, a longstanding pilot project to give the drug to 90,000 expectant mothers at 18 test clinics across the country is still awaiting cabinet approval. The cabinet is reportedly concerned about what it calls the long-term cost implications of the program.

Write to Robert Block at bobby.block@wsj.com and Gardiner Harris at gardiner.harris@wsj.com

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