JOHANNESBURG - An investigation into exclusive arrangements for the supply of fixed dose anti-retroviral drugs in South Africa has come to an end. Fixed dose ARVs combine different drugs into a convenient single pill.
Mylan, an international pharmaceutical company had appointed Aspen as the exclusive supplier of an active pharmaceutical ingredient (API) that is used to produce fixed dose ARVs.
Aspen was also appointed as the exclusive supplier of Mylan’s fixed dose ARVs.
As part of these agreements, Mylan would not market or sell the drugs and the API to any other companies in South Africa.
The Competition Commission received a complaint from Medecins Sans Frontiers (Doctors Without Borders) in September 2012.
The civil society organisation argued that the agreements, which were meant to end in 2016, would harm competition in the South African market.
MSF also alleged that negotiations between Aspen and Mylan on the pricing of the API would influence the final price of the fixed dose ARVs, and could amount to price fixing.
The Commission also initiated its own complaint against Aspen and Mylan as the agreements “possibly constituted a division of markets between competitors.”
In a press statement on Tuesday, the commission announced that it had decided not to refer Aspen Pharmacare Holdings Limited, Mylan Laboratories Limited, Mylan South Africa Incorporated and Mylan Incorporated to the tribunal for collusive and anti-competitive conduct.
In its reasoning with regards to the effects of the agreement, the commission found that Aspen’s competitors still had other sources of supply for active ingredients. The commission also argued that after winning the 2008 ARV tender, Aspen needed guaranteed access to the APIs.
“In appropriate cases, exclusive supply agreements may promote efficient production, planning and stock maintenance,” the commission said in its statement.
It said it would approach each case on its merits.
However, there were aspects of the exclusivity that the commission found “may have had the effect of lessening competition in the market and restricting access to APIs and FDFs manufactured by Mylan.”
Dr Anban Pillay of the department of health warns against these type of arrangements as they deny the procurer the benefit of competition.
Pillay also does not see any efficiencies arising out of them, especially when it comes to the supply of finished products.
The commission's election not to pursue this complaint is partly due to the fact that the companies dissolved the agreements in 2013.
This was before the state’s 2012 tender for finished dose ARVs was finalised. Mylan and Aspen competed against each other in that tender.
MSF shares the department of health’s concern with exclusive contracts.
“It will be important to monitor the eligibility of companies for the next public sector tender to ensure anti-competitive behaviour is not occurring,” according Kate Ribet, MSF’s media liaison officer.
MSF says it is concerned that there may be other such agreements that keep the prices of APIs and essential medicines high.
“Although we understand the commercial nature of these agreements there should be an oversight mechanism to increase transparency.
MSF would also like the Department of Trade and Industry to limit granted patents to new drugs as part of the patent law reform process underway.
“At present, companies obtain several patents on the same medicine--including for combinations of drugs like ARVs. This keeps competition out of the market for longer than necessary, unless special agreements are forged.”