Responding to PhRMA lies in the South African media

Lotti Rutter from the Treatment Action Campaign responds to PhRMA opinion piece in BDLive on 26th February 2014

This Wednesday’s opinion piece – “Strong IP regime could boost FDI” – might have promised a simple solution for increasing foreign direct investment, but unfortunately the reality is much more complicated. Rather than strong intellectual property (IP) protection being the ‘dynamo of growth’ as suggested by PhRMA Vice President Rod Hunter, the available evidence from our developing country peers suggests the exact opposite.

A recent study by Mila Kashcheeva, of 103 countries from 1970 to 2009 found that strong IP protection has a negative correlation with FDI in developing countries. Instead countries with ‘lax’ levels of IP protection achieved higher growth in foreign investment. The actual drivers of FDI in the pharmaceutical sector prove to be labour and production costs and economic incentives.

If granting poor quality patents lead to increased FDI, one would expect South Africa to be awash in investment since virtually every patent applied for here is granted. Instead we have attracted far less FDI than countries with weaker IP protection. Since complying with international trade law, 35 pharmaceutical manufacturing plants have shut down.

In contrast, India’s pharmaceutical industry realised FDI of US$1 billion from April to June 2013, despite India’s proactive adoption of legal safeguards to protect public health. Whatever threats PhRMA may make, India has called their bluff and seen no reduction in investment.

Meanwhile, pharmaceuticals are the fifth largest contributor to South Africa’s trade deficit. By volume, the majority of our medicines originate from India, yet by Department of Trade and Industry figures the import of branded medicines from Germany, the United States, and France contribute most to the deficit. By granting an excessive numbers of poor quality patents to foreign industry, we are digging ourselves into a deficit that is deeper than it needs to be.

PhRMA argues that the “assault” by India in invalidating 15 patents over two years is “significant”. Whilst it is in PhRMA’s interest to have all patent applications granted, the public interest requires that patent monopolies only be granted when truly deserved. Incidentally, India granted 3520 pharmaceutical patents from 2007 to 2012. It is hardly the attack on patents that PhRMA would have us believe it is. But, it isn’t evidence or logic that PhRMA wants to sell – it is fear.

Countries like India are not being radical. South Africa must now follow their lead in utilizing these legal, moderate and rational reforms allowed under international trade law to improve access to life-saving medicines. Despite attempting to distance themselves from the PharmaGate plot unveiled by the Mail & Guardian in January, Wednesday’s article from PhRMA shows the lobbying plan along with its manipulated research is alive and well. The public interest demands that we do not fall for the rhetoric, but assess the available evidence on its merits.

For further information:

Lotti Rutter

081 818 8493


TAC Paper: The Economic and Social Case for Patent Law Reform:

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