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Generic article fails to take South Africa law into account

19 Oct 2011

When commenting on the recent report by the American Federal Trade Commission (FTC), the equivalent to South Africa's competition authorities, on the short and long-term effects of authorised generics, Business Report's article did not address the differences between the legal and regulatory framework in South Africa versus that of the United States. An authorised generic is an approved brand name drug marketed as a generic.

The article on Friday 14 October, "Delay in generics robbing South Africa's sick" stated that a practice of entering into agreements between brand manufacturers and manufacturers of generic drugs to delay launch of a generic version of a branded drug are entered into and thus force consumers to pay 80% more for their medication. These are typically referred to as 'pay for delay' agreements.

From my experience in pharmaceutical litigation, it is highly unlikely that in South Africa the pay for delay agreements are entered into. It is rather a case of unilateral conduct, which is perfectly legitimate because of the exclusivity offered by a patent.

As correctly pointed out in the article by Vicki St Quintin, chief operations officer of the Pharmaceutical Industry Association of SA (PISA), South Africa has a very different system and its legislation, for example, does not allow for the term of a patent to be extended beyond its 20 years.

In effect, and by the time a product comes onto market, the patentee has between five to eight years of effective protection on the market. The considerations on how and what a patentee should be able to recoup for its research and development efforts are therefore very different in South Africa from the US for example.

Furthermore, the US framework encourages a generic manufacturer to challenge patents by offering a 180-day exclusivity period from when the first generic launches its product. The South African framework does not have this. In any event, the report by the FTC concludes that despite the launch of authorised generics, generic manufacturers still enter the market and the number of patent challenges remains robust and has increased.

The article also did not address the fact that an authorised generic is offered at a reduced price, giving relief to the consumer and allowing for price competition to take place when a generic manufacturer launches its product. During the period of patent protection, the patentee is entitled to bring out as many brands of its drug as it wants. This is the benefit of a patent, in return for disclosing to the public what the drug consists of and how it is made up so that others may conduct research and development and improve upon it.

Unfortunately, the issue is much more complex than the article portrays. It touches upon the fundamental principles of patent law, South Africa's patent system, the economics of first generic entry and the careful balancing act that must be undertaken between competition law and intellectual property law, with a proper consideration of the dynamics of the pharmaceutical market in South Africa, which is very different to countries such as the US and Europe.