By Martin Welz
Clicks, South Africa’s largest pharmacy chain, and Bayer South Africa, the local scion of the multi-billion-dollar German pharmaceutical giant, were at war in the Patent Court last week.
On the face of it, the hearing was about just 2,963 packs of blood-thinning pills worth less than R2m still in Clicks stock rooms. As Clicks pointed out, that’s only a fraction of one percent of Bayer South Africa’s annual turnover.
And as Bayer, in turn, pointed out: ditching those 2,963 packs of pills – which is what it wants Clicks to do – would cost Clicks just 0,005% of the Clicks Group’s turnover.
But appearances can be deceiving. This is a heavy-weight boxing match. A closer look at the affidavits filed in the case reveals that it’s but a preliminary round to a much bigger battle to come. Ultimately, there is a great deal more – and much, much more money – at stake for Bayer, for Clicks and for all South Africans in terms of their Constitutional right to affordable health services.
First, a brief introduction to the contestants, as described in court papers.
The Applicants – Bayer Intellectual Property GMBH, Bayer AG, and Bayer (Pty) Ltd – form part of a multi-billion-dollar multinational group listed on all Germany’s stock exchanges. It has a market capitalisation of over R950bn and publicly disclosed assets of perhaps double that value. Bayer’s storied 150-year history stretches from the development of aspirin and its role in the Holocaust to its position as one of the largest pharmaceutical and life sciences companies in the world.
The Respondent, New Clicks SA, through its United Pharmaceutical Distributors division, supplies pharmaceuticals to 650 Clicks pharmacies, major private hospital groups and over 1,300 independent pharmacies. Its JSE-listed parent company, Clicks Group Ltd had a turnover of R34bn in 2020 (R37.3bn in 2021).
We will refer to the opponents as simply Bayer and Clicks.
In 2007, Bayer was granted a South African patent that covers the manufacture and use of an oral, rapid-release formulation of rivaroxaban, an anticoagulant medication to be taken as a pill once a day. It is sold under the brand name Xarelto.
Xarelto is prescribed for the treatment of patients prone to develop blood clots that cause disorders such as pulmonary thrombosis, deep vein thrombosis and stroke. It is also widely prescribed for patients having hip and knee replacements, making it Bayer’s highest-selling pharmaceutical product globally.
Since its first sale in 2008, more than 83 million global patients have been treated using Xarelto.
It is also Bayer South Africa’s biggest-selling pharmaceutical product by a considerable margin: last year, its sales of the product totalled R310m and accounted for more than 25% of its pharmaceutical division’s turnover.
Bayer previously held a patent (that expired in 2021) for the same medicine, rivaroxaban, but it was to be taken as a pill twice a day.
The innovation for which it was granted its (now contested) 2007 patent – which effectively extended Bayer’s exclusive access to the market until 2027 – was simply the change of dosage, from two pills a day to one pill a day (in the interim, it was found to be as effective). This is known in the trade as a ‘Swiss’ patent.
In anticipation of the expiry of Bayer’s original 20-year patent for rivaroxaban (the active ingredient of the pill) that was registered in 2000, in 2021, two generic manufacturers – Dr Reddy’s and Austell Pharmaceuticals – started importing their generic versions of this hugely successful blood-thinning medicine. Both generics were approved by the South African health authorities.
Austell’s Rezalto tablets went on the market in January 2021. Bayer brought an urgent court application to stop them, which was settled out of court some months ago.
Dr Reddy’s generic, Rivaxored, came on the market in March 2021, priced at 42% less than Bayer’s Xarelto. (Bayer’s selling for R36 per tablet, against Dr Reddy’s R21 per tablet.)
On 4 May 2021, Bayer instituted legal action against the generic manufacturer, Dr Reddy’s for alleged infringement of its updated South African patent. Dr Reddy’s opposed the application, inter alia contesting the validity of the renewed patent (the so-called Swiss patent) that Bayer had obtained in 2006.
Bayer at the same time applied for an interim interdict prohibiting Dr Reddy’s from importing and distributing its generic pending finalisation of the main case (which is yet to get to court). The interim order was granted by Ms Justice Keightly only nine months later, in January 2022.
In those nine months, Dr Reddy’s had continued supplying various pharmaceutical distributors, including Clicks, Dis-Chem and Alpha Pharm with its generic, Rivaxored. The pharmacies had continued dispensing Dr Reddy’s generic pills at 40% below the price of Bayer’s product; a substantial benefit for patients, medical aid funds and government health services.
When the interim interdict stopped Reddy’s from further supplying Rivaxored to pharmacies, it did not stop the pharmacies from continuing to sell the stock they already had in hand.
After hearing market rumours that the pharmacies had sufficient stocks of Dr Reddy’s generic to last for years, in February this year, Bayer launched another urgent Patent Court application. This time it wanted to stop the three pharmacy groups from selling the Dr Reddy’s generic pills they still had in stock.
Bayer argued that if the pharmacies were allowed to continue selling the generics until the main action is finalised, the harm caused to Bayer South Africa would be “substantial, irreparable and unquantifiable”.
In support of its Swiss patent, Bayer said that changing the dose regimen from two to one tablet a day required extensive trials across several countries to establish that the one pill a day was effective and safe. It also required considerable resources to market the new product. Generics can be sold for less because they did not have those development costs.
Dis-Chem and Alpha Pharm reached a settlement with Bayer, leaving Clicks with its 2,963 unsold packs of pills alone in opposing Bayer’s interim interdict application in the Patent Court last week.
Clicks opted not only to continue opposing the interim interdict application, it announced that, in the public interest, they would be joining Dr Reddy’s in defending the still-pending main patent case.
There are undoubtedly advantages to a single-dose-a-day regime (convenience being just one of them). However, when we look at the figures, the financial incentive for Bayer to change the dosage – thereby acquiring an extension of its patent and exclusive access to the market for an extra six years – is so overwhelmingly obvious that it raises questions about its motivation. This gave Clicks cause for its Constitutional challenge.
In its opposing papers, Clicks argues that while it is true that generic manufacturers have lower costs, their products are always cheaper because they have to be: the only competitive advantage a generic manufacturer has is price.
“The Clicks Group’s public healthcare agenda is to make healthcare services more affordable – and thus accessible – to all people in South Africa […] by driving generic substitution of medicines, wherever possible,” it stated in court papers. “The pharmacists in Clicks pharmacies are encouraged to comply with their legal and moral obligation to offer generic alternatives to patients.”
In support of its argument that Bayer’s 2007 Swiss patent should be declared invalid in South Africa, Clicks quotes the Doha Declaration to which South Africa is a signatory. It notes that the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) can and should be interpreted in a manner supportive of member countries’ right to protect public health and, in particular, to promote access to medicines for all.
In terms of section 27 of South Africa’s Constitution, citizens have a right of access to healthcare services; and the state has a positive obligation to “take reasonable legislative and other measures, within its available resources, to achieve that right’s progressive realisation”. Cost is the main inhibitor of access the medicine.
Clicks alleges that Bayer’s research trials claims are overstated. It argues that if section 25 of the Patents Act is found by the court to allow claims such as Bayer’s introduction of a single dosage instead of two pills a day – “a new dosage claim in respect of an existing medicine, for the same indication” – as a new, patentable invention, then that section of the Patents Act should be struck out by the court as being unconstitutional and therefore invalid.
Last week’s hearing was a preview of what to expect in the impending main case, which involves more parties, many, many more pills, and as many more millions.
However, lawyers involved suggest it could take anything up to four more years to bring that case to finality. The patent at issue will, in any event, expire on 19 January 2026, which means the ‘interim’ order will have been permanent in its effect. Win or lose the main case, Bayer will have succeeded in keeping generic competitors out of its extremely lucrative market for another three or four years.
Judge Collis reserved judgment.
*Both sides are represented by South Africa’s top patent law firms: Adams and Adams for Bayer; Von Seidels for Clicks.
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