Little rationale for state drug firm
IT IS common cause that the Department of Science and Technology’s determined effort to launch a state-owned pharmaceutical company has its roots in a policy decision taken at the African National Congress’s (ANC’s) national conference at Polokwane in 2007.
However, the rationale for this decision has never been clear, and it has become increasingly difficult to explain as time has passed and both domestic and international circumstances have changed. What problem is the relaunch of Ketlaphela in 2015, now sans a private sector pharmaceuticals partner, intended to fix?
Eight years ago, SA was just starting to emerge from its selfgenerated fog of HIV/AIDS denialism. Having resisted calls for the mass distribution of life-saving antiretroviral drugs during the Thabo Mbeki era, it was dawning on the government that reversing that policy was going to be a monumental task, in terms of both administration and funding.
Imported antiretrovirals were expensive, in part because no effort had been made to negotiate lower prices for drugs the government saw little need for in the first place, but also because the patents were held by multinational pharmaceutical companies. There was a valid argument, as propounded by India and Brazil, among others, for developing countries to take control of their own fate by producing generic versions of essential medicines themselves, even if this meant breaking international patent agreements.
Much has changed since then, however. The Polokwane conference marked both Mr Mbeki’s downfall and a sea change in the government’s attitude to HIV/AIDS prevention and treatment, and thanks in part to India and Brazil forcing the issue, the price of antiretrovirals has dropped dramatically. SA, boasting the most extensive HIV/AIDS treatment programme in the world, benefits from some of the lowest prices, such as generics produced locally.
The question needs to be repeated: what problem is the relaunch of Ketlaphela, which was originally a joint venture between the Industrial Development Corporation, state-owned fluorochemical producer Pelchem and Swiss pharmaceuticals group Lonza, trying to fix? Security of supply of antiretroviral drugs is no longer an issue. Nor is price.
Producing more drugs locally would certainly reduce the socalled “pharmaceutical trade deficit”, but that would be a false economy if this cannot be achieved at an equivalent, or lower, cost than imports. That, unfortunately, is a high mountain to climb, and SA’s state-owned entities do not have a good track record coping with heights.
Yet, the state has reportedly undertaken to buy 40% of its HIV/AIDS drugs from Ketlaphela from day one, so that it can “establish the brand”. It will, in other words, act as a middleman, importing drugs and selling them to a captive market, adding no value while inflating costs to fund the creation of a manufacturing capability of its own.
One of the aims expressed by the ANC when it punted the company was the beneficiation of fluorspar, the feedstock for chemicals that are the active ingredients in a number of drugs, including those used to treat HIV/AIDS and cancer. SA has a natural advantage in the extraction of high-quality fluorspar at a relatively low price, yet lags behind China and others in terms of production, so there is some validity to this motive.
Yet it is hard to see how a stateowned entity could make a go of it when, by the department’s own admission, the “value proposition was not attractive enough” for private sector investment.