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One of the founding legislative ideals of the Competition Act 98 of 1998 is “to provide consumers with competitive price and product choices”.
This legislative imperative is aptly foregrounded in the preamble of the act, which advocates for a people-centric mandate borne of “an efficient, competitive economic environment, balancing the interests of workers”, and most importantly vulnerable consumers.
Two decades later, the Competition Commission is still seized with implementing this mandate and to build an inclusive and growing economy. This surely resonates with the founding principles of the 7th administration, which among other principles, calls for the reduction of the incremental rise in the cost of living. As the custodian of the Competition Act, the commission has accordingly played its part in ensuring affordable health care. Two projects, 22 years apart, have set the tone for the commission’s work in the fair pricing of chronic medication.
In 2002, Hazel Tau, the Treatment Action Campaign and other complainants represented by the Aids Law Project brought a complaint to the commission alleging that the first-line antiretrovirals (ARVs) used to treat HIV/Aids were excessively priced. At the time, these drugs were also only available to the private sector and largely unaffordable.
Taking you back to early 2000s SA, the price of the ARV drug, AZT, was 665% higher than the best-priced generic alternative medication for AZT available elsewhere in the world. Why was SA not purchasing the best-priced generic alternative for AZT? This is because two multi-national pharmaceutical companies, GlaxoSmithKline SA and Boehringer Ingelheim, held a patent for supplying those drugs in SA. A patent allows for the holder as an inventor to exclusively exploit the product for a period prescribed in the patent, and restrict generic manufacturers from gaining entry into the market. This limits competition in the pharmaceutical industry and translates to higher prices for consumers.
After an investigation, advocacy activities, and engagement with these two companies, the commission concluded settlement agreements with them, which in turn granted the market immediate access to generic ARV medication and led to a major decrease in the prices charged for first-line ARVs, not just in SA but across the region as well. Speaking in 2021 at a seminar about this case, Tau herself said she will forever be grateful for the lives saved by making ARVs accessible to all those infected with HIV, but called for more work to be done to achieve the same for the treatment of other chronic diseases.
Almost 22 years later, the commission continues to fight for exactly this. In September 2023, it initiated a complaint based on the information that Johnson & Johnson and its subsidiary company, Janssen Pharmaceutica, had filed a secondary patent for Bedaquiline. This is a drug used in the treatment of tuberculosis (TB). The secondary patent effectively limited the entry of generic alternatives into the market.
Subsequently, the commission extensively engaged with the two companies on the allegations of anti-competitive conduct, and as a result of our extensive advocacy, they agreed not to enforce the secondary patent of Bedaquiline in 134 low- and middle-income countries, including SA. This means that generic manufacturers may manufacture and sell high-quality generic versions of the drug, effectively providing the procurers of TB drugs with alternative options.
This alleged conduct by Johnson & Johnson and Janssen Pharmaceutica would have further limited the national department of health) as the largest procurer of Bedaquiline in SA to only purchase from them, and allegedly enable these companies to charge excessive prices to the department.
Another positive result of the commission’s engagement is that the companies renegotiated the Bedaquiline prices charged to the health department. Accordingly, the price has been reduced by about 40% from R5,577.12 to R 3,148.00 inclusive of VAT and logistics. The price charged to the department is aligned to what these companies are offering to the Global Drug Facility (the world’s largest procurer of TB medicines and diagnostics).
These two cases serve as proof that even over two decades later, the commission remains committed to continuing to advocate for affordable health care, is dedicated to investigating complaints of alleged excessive pricing, and will continue to use the Competition Act and our legislative mandate to reduce the barriers to entry in the market of generic medication.
We will, however, continue to prioritise work in secondary patents and act particularly where secondary patents have failed in other jurisdictions with more rigorous assessments. The commission calls on pharmaceutical companies to reconsider their secondary patenting practices in SA and, moving forward, it may seek penalties if pharmaceutical companies continue to pursue meritless secondary patents.
Makunga is spokesperson for the Competition Commission of SA
