Last month, the Cabinet made healthcare the focus of the first phase of its new Intellectual Property (IP) policy.
The government hopes the policy will better coordinate South Africa’s fragmented IP laws and balance private rights with those woven into South Africa’s Constitution (such as the right to health). Health minister Aaron Motsoaledi put it more bluntly, telling a press conference that the main goal is “cheaper drugs for the public and private healthcare sector in South Africa.”
The fine detail is not yet set, but the direction is clear; companies will find it far harder in future to get patents. Moreover, patents granted in South Africa will be easier to override in the name of public health.
Here, South Africa seems to want to emulate India, with its long-held scepticism of IP rights and laws shaped to prioritise generic drug manufacturing.
Despite its political attractions, this oppositional approach in which IPRs are viewed as a zero-sum game, is looking increasingly outdated. Some of South Africa’s key competitors already realise the limits of basic manufacturing, commodities and agriculture as a basis for economic progress. They are pivoting their economies towards innovative, knowledge-based sectors such as biotech, chemicals, entertainment, pharmaceuticals.
As a result, IP rights are fast becoming an increasingly important plank in national economic growth strategies.
Take China, which has recently strengthened its IP laws to make itself a global leader in innovation. The central government understands that future geopolitical and economic success relies on China completing its shift from low-value manufacturing to innovation.
This change of mindset is particularly evident in the health sector. For years Chinese academia and the government looked to India with its large generic medicine sector as a model. Here, the cost of medicines dominated policy discussions – much like South Africa’s new IP policy.
In the last couple of years, the Chinese government has moved to embrace innovation as the major driver of economic growth. The announcement of a number of reforms to China’s IP system has started to put the country closer to the world-class IP systems of the United States and European Union. A patent linkage system, stronger rules on the protection of clinical trials data and patent term extensions to compensate for delays in the mandatory drug approval system are either underway or recently approved.
And the reforms are paying dividends. Leading Chinese pharma companies that historically focused on generics are building research and development capabilities and making investments in innovative drugs. The number of applications of local innovative drugs entering clinical trials in China grew from 21 in 2011 to 88 in 2016, a compound annual growth rate of 33 percent. Many of these new drugs target local Chinese needs, not the global market.
China’s government, unlike South Africa’s, recognises that a strong IP system and access to medicines are not fundamentally incompatible. Here, China is enacting reforms to make its medicines market more competitive in a bid to reduce the cost burden on patients and the healthcare system.
China is moving to reduce local sales taxes on medicines; currently 15% VAT is charged on medicines sold in the private sector in South Africa. China is also streamlining the process of registering a new drug in the country, reducing the costs of market entry and speeding up access. Approving a new drug can take the South African drug regulator up to six years.
Many patented drugs are also now on China’s public-sector reimbursement lists, allowing prices to be negotiated down by as much as 50%. At the same time, the government is introducing several reforms to create a thriving market in low-cost, high quality generic medicines.
South Africa is experiencing a crisis of growth and foreign investor confidence. That brings a desperate need for new and sustainable sources of economic growth. Should the country really weaken intellectual property rights, which could deter foreign investors and local companies from investing in South Africa?
India also shows that a strong generic medicines sector and weak IP is no guarantee of access to medicines. A recent global survey on access to healthcare published by The Lancet ranks India 145th among 195 countries, largely due to its weak health infrastructure and shortage of doctors.
As South Africa looks to the future, it can learn from its BRICS partners. China’s focus on innovation, while simultaneously addressing access to medicines, means it is far more in tune with the twenty first century.
Jasson Urbach is director of the Free Market Foundation. Philip Stevens is director of Geneva Network, a UK-based research organisation focused on innovation policy.