Just four years ago 41 drug companies operating in SA sued the government over its patent laws. Activists clamoured for pharmaceutical companies to reduce the costs of essential drugs and the pharmaceutical industry argued that intellectual property rights were crucial to enable companies to innovate.
The industry has come a long way since then. Pharmaceutical manufacturers have adopted a more conciliatory approach to government interference and price regulation. In the latest bout of court action - this time the pharmacists sued government - the pharmaceutical giants chose to co-operate, introducing a transparent pricing system in line with new government regulations with little fanfare.
Companies have shown more willingness to be transparent in their pricing structures, farm out licences to generic companies and come up with ways to work within government's framework of making medicine more affordable.
"The private sector is willing to play a constructive role to expand volumes and decrease prices," says Chirfi Guindo, CEO of drug manufacturing firm MSD.
Since controversial legislation, which prevented pharmaceutical companies from paying discounts to customers and forced them to publish a "single exit price" (SEP), was introduced last year drug prices have come down by 21%, according to Mediscor.
This is far less than the 40%-70% expected when the regulations were first rolled out.
But the next phase of the regulations, where government will introduce international benchmarking to ensure SA customers pay similar prices for drugs to customers in other countries, should reduce prices further. Plus pharmaceutical companies haven't been allowed to increase the prices of their products since the introduction of the SEP in June 2004.
"When the regulations are implemented in full, savings of about 40% should be evident," says Guindo.
The pricing regulations are still under review by the constitutional court, but the industry hopes the SEP will not be affected.
However, consumers are unlikely to get their medicines cheaper unless more people are shifted into the private health-care net.
"Increased volumes are crucial for reducing the cost of drugs further," says Astra Zeneca CEO Guni Goolab.
The Council for Medical Schemes is driving a plan to include more people in private medical schemes. A low-income scheme could bring in another 2m-3m people.
Drug companies say they would be willing to reduce their prices for this segment of the market if they could be guaranteed volumes.
"But regulatory hurdles would have to be addressed," says Pharmaceutical Manufacturer's Association's (PMA) Vicki Ehrich, because the system prevents any type of differential pricing, for example, providing cheaper drugs to a large low-income scheme.
Yet differential pricing is widely used to provide drugs cheaper to poorer nations.
Antiretrovirals (ARVs) in developing countries cost a fraction of the price they are sold for in developed countries.
"It's an accepted practice in the pharmaceutical industry that those who can pay, subsidise patients in other markets who can't," says Ehrich.
The biggest battle is still over patents. How long should a pharmaceutical company have to recoup its costs of developing and marketing a drug? How necessary are the costs involved in taking a drug to market? And should the rules be different for essential drugs?
The pharmaceutical industry says that it costs about US$8bn to get a drug onto pharmacy shelves and, without patent protection, there would be little incentive for them to develop new, life-saving drugs.
But new ways of licens ing and innovative funding structures could help spread more of the benefits that pharmaceuticals bring without compromising their intellectual property.
MSD plans to set up a freestanding company with other pharmaceutical companies. These companies will then donate dossiers or registrations of drugs to the freestanding company to market and sell.
"We'd like to get a black empowerment company on board as well as black doctors and pharmacy groups," says Guindo.
In another empowerment partnership, Merck granted generics manufacturer Enaleni Pharmaceuticals the rights to apply for selected government tenders for the manufacture and supply of products to which Merck holds the registered dossiers.
"Enaleni will be looking to secure tenders to provide products on the essential drug list, many of which we have registered dossiers for, yet to date have not had the capacity to manufacture in large quantities," says Merck SA CE Deon Vos.
"We now have the opportunity to release a number of products that can assist government in providing more affordable health care."
Companies have been reluctant to grant voluntary licences to generic companies, but the Treatment Action Campaign (TAC), an Aids activist group, has shown companies that it may be better to go this route than fight it out in court. Two years ago, the TAC won a court battle to force GlaxoSmithKline to license four and Boehringer Ingelheim three generic pharmaceutical companies to manufacture generic versions of their ARVs.
This is unlikely to happen in other therapeutic areas.
"Aids is the one area where there are a large number of existing patents and as yet no alternative generic treatment," says Ehrich. "In most other therapeutic categories there is generic and therapeutic competition between different products."
However, aside from the issue of security of supply, especially in treating Aids, multiple licences are crucial to bring down prices.
"The real price decreases show only once multiple generic versions of a drug are released," says National Association of Pharmaceutical Manufacturers vice-president Stavros Nicolaou. "True competition results from the granting of a number of licences."
With making medicine more affordable a government priority, pharmaceutical companies have learnt that taking the health minister to court is not necessarily the way to win the public's hearts and minds.
A better way to deal with challenge is to do what drug companies do best: innovate.
