The pharmaceutical companies were assured by the South African government that patent and intellectual property guarantees would be respected. But while the pharmaceutical companies sought to regain public relations yardage from the settlement, industry observers told United Press International that the long-term repercussions could hinder drug development.
William Nixon, president of Generic Pharmaceutical Industry Association in Washington, told UPI the decision to drop the lawsuit would affect investment and research.
"The drug companies have taken a beating from a public relations standpoint, and that always affects investment," he told UPI. "Also, with this decision their global revenue estimates are going to be way off for these drugs. They invested many millions of dollars developing the drugs, and now they are all but giving them away."
But perhaps the biggest effect will be felt further down the road when other countries start demanding similar treatment, he said.
"Count on it. It's the domino effect," Nixon commented. "If South Africa, then why not Brazil? If Brazil, why not Mexico? If Mexico, why not Canada, and if Canada why not the United States?
"We're cognizant of the issue, but we have a different economic model and some courageous member companies who are determined to see the cost of drugs reduced regardless of profits."
International Federation of Pharmaceutical Manufacturers Associations (IFPMA) and its members said they were pleased with the decision.
"The winners in this settlement are the South African patients who need continued and enhanced research, development-and delivery-of quality medicines and vaccines," said Dr. Harvey Bale, director general of IFPMA.
"Today's agreement reflects the will of each party to work together," he said. "It demonstrates the commitment of the research-based pharmaceutical industry to explore further partnerships with the government, while it reaffirms the South African government's commitment to its obligations under the WTO Agreement on Trade Related Aspects of Intellectual Property Rights, or TRIPS."
Under the settlement, the pharmaceutical companies agreed to pay the government's litigation costs, while the government said it would try to protect patents.
The agreement "balances the health needs of the South African population, respect for intellectual property, and the government's interest in preserving the option of taking advantage of the flexibility in the TRIPS agreement to address public health concerns," said Bale.
Bob Huber, a spokesman for Pfizer Pharmaceuticals, which was not a party in the lawsuit, agreed that intellectual property concerns are central in the debate.
"We're strong advocates of intellectual property protections," he told UPI, "They are the soul of this business, and without them there will be no more cures coming. Retrovirals slow the disease down, but they are not a cure. If you take away patents you take away incentives for companies who are willing to take on the risk of developing new products."
"We're mindful of why others feel this strongly." He noted that Kofi Annan, secretary-general of the United Nations, and the World Health Organization have said in recent weeks that intellectual property protection is key to bringing forward medicines, vaccines and diagnostics urgently needed for the health of the world's poorest people.
"Any abrogation of health care patents would be a catastrophe," he said. "These are the incentives that bring new products to market and attract investors in the first place."
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