1. We act on behalf of the Treatment Action Campaign ("the TAC").

2. We refer to previous correspondence between the TAC and the AIDS Law Project ("the ALP") on the one hand and MSD (Pty) Ltd ("MSD") on the other. Much of this correspondence, which dates back to 14 May 2002 and deals with access to MSD’s essential antiretroviral (ARV) medicines efavirenz and indinavir (marketed in South Africa as Stocrin® and Crixivan® respectively), is referred to in a letter from our offices dated 13 February 2004. A copy of that letter is attached hereto marked "A". Copies of the correspondence between our offices since that date are attached hereto marked "B", "C", "D" and "E" respectively.

3. It has come to our client’s attention that MSD is currently unable to satisfy public sector demand for efavirenz. As you know, efavirenz is one of the key ARV drugs used in the treatment of HIV infection and is used by public sector health facilities as part of the first-line ARV treatment regimen. While we acknowledge that many patients can be and in fact are placed on nevirapine-based regimens that exclude the use of efavirenz, we nevertheless recognise that in many cases – such as concomitant treatment for tuberculosis, certain liver conditions and alcohol dependence – the use of nevirapine may lead to serious life-threatening adverse events. In such cases, access to efavirenz is essential.

4. According to information that we have received, MSD has been unable to deliver sufficient stocks of efavirenz to satisfy the October and November 2004 orders placed by the Gauteng Central Medicines Depot in Auckland Park. As a direct result, Chris Hani Baragwanath Hospital has only received partial delivery of its orders. As recently as 8 November 2004, MSD was only able to deliver 300 bottles of 600mg efavirenz capsules, which we have been advised amounts to about 35% of a month’s supply at the hospital’s current dispensing rate and significantly less stock than is outstanding on previous and current orders.

5. This has resulted in extreme caution in the initiation of treatment for new patients. With growing public demand for treatment and lengthy waiting queues, this is something that the public sector can ill afford. It places the lives of many people living with HIV/AIDS at risk.

6. This is not the first time that stock shortages of efavirenz have been brought to the ALP’s and TAC’s attention. Our client and we were advised in January of this year that a shortage of efavirenz 50mg (used in the treatment of HIV infection in children over the age of three years) resulted in at least one patient defaulting on treatment for four days.

7. At the time, the TAC brought to your attention the serious consequences of patients defaulting on their treatment. In particular, our client drew attention to the potential for the development of resistance, most notably in the case of a non-nucleoside reverse transcriptase inhibitor such as efavirenz where resistance is not only limited to the particular drug in question but all other drugs in the same class, such as nevirapine.

8. In his letter dated 19 January 2004, a copy of which is attached hereto marked "F", the chairperson of the TAC explained how this "has the potential to limit severely the future treatment options of children currently using an efavirenz-based regimen", recognising that "the treatment options of children, relative to those of adults with HIV-infection, are already somewhat limited."

9. In the same letter, Mr Zackie Achmat explained as follows:

10. It has been our client’s view for some time that the most effective and efficient way to ensure a sustainable supply of affordable efavirenz is for MSD to grant multiple non-exclusive voluntary licences on reasonable terms to importers and manufacturers of generic efavirenz products.

11. In fact, our client has consistently called for your company to publicly commit to the grant of such licences. Instead, MSD has indicated in a letter to our offices that it "is open to evaluating further bona fide applications [for voluntary licences], provided that they meet the required standards for quality and sustainability." A copy of that letter, already referred to above as "C", is attached hereto.

12. We record that to date, however, MSD has:

(a) Granted a single "non-exclusive patent license for the manufacture and sale of a generic version of Efavirenz to Thembalami Pharmaceuticals (Pty) Ltd. ("Thembalami"), the joint venture partner of Adcock Ingram, for South Africa and other countries in the Southern African Development Community (SADC)";

(b) Has expressly informed at least one generic manufacturer that it has no intention whatsoever of licensing anyone else at this point because "[i]n view of the forecast numbers … received from the ministry of health in regard to treatment of patients in the provinces, … [MSD does] not believe that more than two suppliers of Stocrin and Crixivan are reasonable"; and

(c) Has informed the generic manufacturer referred to in paragraph 12.b above of its intention "to reconsider multiple suppliers as the patient numbers increase and warrant more capacity in supply of these drugs."

13. However, not only has Thembalami failed to bring any efavirenz products to market, but also all its ARV products have been recalled from the market by parent company Ranbaxy (SA) (Pty) Ltd. In addition, Ranbaxy Laboratories Limited India has voluntarily withdrawn all its ARV products from the World Health Organization (WHO) list of pre-qualified medicines. As you know, WHO pre-qualification means that the product has been found to be acceptable, in principle, for procurement by United Nations agencies.

14. We once again submit that MSD’s failure to meet the demand for a life-saving medicine constitutes the abuse of rights in a patent, being a well-recognised ground for the granting of compulsory licences under section 56 of the Patents Act, 57 of 1978. In addition, the same conduct constitutes abuse of market dominance, as contemplated in section 8 of the Competition Act, 89 of 1998, as does MSD’s refusal to license additional generic drug manufacturers.

15. In our previous correspondence dated 13 February 2004 (already referred to above and attached hereto marked "A"), we once again drew attention to the 9 December 2003 agreements entered into between the complainants (Hazel Tau and others) and GlaxoSmithKline and Boehringer Ingelheim respectively as the basis for the settlement of the excessive pricing complaint lodged before the Competition Commission in September 2002 (case no. 2002Sep226). In terms of these settlement agreements, the two groups of pharmaceutical companies agreed to licence four and three generic pharmaceutical companies respectively to manufacture and/or import generic zidovudine, lamivudine and nevirapine products.

16. We call on MSD to commit to doing the same, or alternatively, to follow the example of Bristol-Myers Squibb and stop enforcing its exclusive rights in ARV medicine patents in sub-Saharan Africa.