MEDIA RELEASE FROM THE COMPETITION COMMISSION 16 October 2003 Competition Commission finds pharmaceutical firms in contravention of the Competition Act The Competition Commission has found that pharmaceutical firms GlaxoSmithKline South Africa (Pty) Ltd (GSK) and Boehringer Ingelheim (BI) have contravened the Competition Act of 1998. The firms have been found to have abused their dominant positions in their respective anti-retroviral (ARV) markets. In particular the Commission has found the firms have engaged in the following restrictive practices: 1. Denied a competitor access to an essential facility 2. Excessive pricing 3. Engaged in an exclusionary act The Commission has decided to refer the matter to the Competition Tribunal for determination. Menzi Simelane, Commissioner at the Competition Commission, says," Our investigation revealed that each of the firms has refused to license their patents to generic manufacturers in return for a reasonable royalty. We believe that this is feasible and that consumers will benefit from cheaper generic versions of the drugs concerned. We further believe that granting licenses would provide for competition between firms and their generic competitors." "We will request the Tribunal to make an order authorising any person to exploit the patents to market generic versions of the respondents patented medicines or fixed dose combinations that require these patents, in return for the payment of a reasonable royalty. In addition, we will recommend a penalty of 10% of the annual turnover of the respondents' ARVs in South Africa for each year that they are found to have violated the Act." Simelane said these practices violate the Competition Act of 1998's prohibitions against excessive pricing (section 8(a)), refusing access to essential facilities (section 8(b)) and exclusionary acts that have an anticompetitive effect that outweighs technological, efficiency or other pro-competitive gains (section 8(c). "Indeed the very goals of our Competition Act - promoting development, providing consumers with competitive prices and product choices, advancing social and economic welfare and correcting structural imbalances – have been made difficult in this context by the refusal of the respondents to license patents." The original complaint in this matter was filed by Hazel Tau and others alleging that GSK and BI were charging excessive prices to the detriment of consumers for their patented ARV medicines. GSK and BI hold patents on certain antiretroviral (ARV) medications used to treat HIV/AIDS. GSK holds patents in South Africa on AZT (branded as Retrovir), Lamivudine (branded as 3TC) and AZT/Lamivudine (branded as Combivir). BI holds patents in South Africa on Nevirapine (NVP) (branded as Viramune). ENDS Prepared by: Beachhead Media & Investor Relations Dani Cohen 021 469 9000 / 082 897 0443 Jennifer Cohen 011 214 2400 /082 468 646 On behalf of: The Competition Commission Further info: Zolile Ntukwana Manager, Compliance Division at the Competition Commission 082 774 6017 PRESS RELEASE FROM SOUTH AFRICAN TREATMENT ACTION CAMPAIGN 16 October 2003 The Treatment Action Campaign welcomes the statement below by the Competition Commission. Just over a year ago, Hazel Tau and 10 others lodged a complaint at the Competition Commission against GlaxoSmithKline and Boehringer Ingelheim for excessive pricing of their antiretroviral medicines. The Competition Commission has now decided to refer this matter to the Competition Tribunal for ajudication. The 11 complainants are: COSATU, the TAC, CEPPWAWU, Hazel Tau, Nontsikelelo Zwedala, Sindiswa Godwana, Sue Roberts, Isaac Skosana, William Mmbara, Steve Andrews and Francois Venter. Two additional parties joined the complaint in February 2003, the AIDS Consortium and a TAC volunteer who subsequently died of AIDS in June . For questions on the Competition Commission case, please contact Jonathan Berger on 011 717 8600 or 083 419 5779, or Fatima Hassan on 083 279 9962. GSK PRESS RELEASE GlaxoSmithKline takes further action to help the world’s poorest fight HIV/AIDS Combivir down to 65 cents per day; extensions to South Africa voluntary license London, UK – 16 October 2003 – GlaxoSmithKline (GSK) today announced further action to help the world’s poorest countries meet the unique challenges of HIV/AIDS. In keeping with its commitment to pass on cost savings in the manufacture of antiretrovirals (ARVs), the company has again reduced the not-for-profit prices of its HIV/AIDS medicines for qualifying countries and organisations. It has also extended the voluntary licence granted to Aspen Pharmacare, sub-Saharan Africa’s largest generics company, for the manufacture and sale of antiretrovirals. The latest reduction lowers the not-for-profit price of Combivir – the backbone of HIV/AIDS treatment regimens currently recommended by the World Health Organisation (WHO) – from US$ 0.90 cents to 0.65 cents per day. GSK has also reduced the not-for-profit price of many of its other HIV/AIDS medicines. For example, Epivir is now available at US$ 0.19 cents per day, and Retrovir at US$ 0.58 cents per day. The price reductions announced today are made possible by further improvements in the manufacturing process as well as the economies of scale achieved. To date, GSK has secured over 150 arrangements to supply preferentially priced HIV/AIDS medicines to 56 countries. In the six months from April to September 2003, GSK shipped over 6 million tablets of preferentially priced Combivir. The current voluntary licence granted to Aspen Pharmacare, which relates to the manufacture and sale of Combivir, Epivir and Retrovir, covers only the public sector in South Africa and Zimbabwe. GSK is now extending this licence to include both the public and private sectors and all countries in the Sub-Saharan region. "The HIV/AIDS pandemic presents a unique challenge to the global community. The actions we are announcing today demonstrate our commitment to playing an integral role in the global response through sustainable preferential pricing, partnership and community investment, and research and development of new medicines and vaccines to fight disease," said Jean-Pierre Garnier, CEO of GlaxoSmithKline. In response to the announcement, Dr. Jack C. Chow, Assistant Director-General of the WHO for HIV/AIDS, TB, and Malaria said: "WHO welcomes these proactive steps taken by GSK to lower prices and extend its license for the generic manufacture and sale of antiretrovirals in sub-Saharan Africa. Such steps will contribute to the expansion of ARV therapy in resource-poor settings and accelerate progress towards the WHO’s goal of providing life-saving ARVs to three million people by the end of 2005. "When combined with the building of health infrastructures, innovative public-private partnerships and the training of national health workforces, the company's efforts are a major gain in the campaign in support of people living with HIV/AIDS." The UK Secretary of State for International Development, Hilary Benn MP, said: "I very much welcome this announcement from GlaxoSmithKline, particularly the extension of their voluntary licence with Aspen, which will help increase access to essential medicines in developing countries. If we are to combat the HIV/AIDS epidemic, much more is required from developing country governments, industry and donors. The UK is committed to play our part, through treatment and prevention. And what we must not forget is that if poor people are to get access to medicines they also need a functioning health system." Notes for Editors GSK is the leading supplier of HIV/AIDS medicines and also an industry leader in the research and development of medicines and vaccines for diseases of the developing world, including an HIV/AIDS vaccine. The company believes it is the only company researching the prevention and treatment of all three of the World Health Organisation's priority diseases in the developing world: HIV/AIDS, malaria and tuberculosis. This announcement reflects GlaxoSmithKline's long-standing and continuing commitment to improve access to medicines in developing countries. GSK has been offering substantial discounts on vaccines to governments, charities and agencies for public health programmes for over 20 years. GSK pioneered sustainable preferential pricing for antiretrovirals in 1997, when the company made Retrovir available for use in mother-to-child transmission reduction programmes in the developing world at up to 75% off the global price. In 2000, the company became a founding member of the Accelerating Access Initiative (AAI), a public-private partnership to increase sustained access to appropriate, good quality intervention in the fight against HIV/AIDS, including antiretroviral therapy. In 2001, the company expanded its access programme, lowered its preferential prices and extended not-for-profit preferential pricing to more customers, countries and medicines. It also promised to continue to find ways to reduce costs and pass those savings on to patients, In September 2002 and April 2003, further price reductions lowered the single not-for-profit price of Combivir to $0.90. Today’s price reductions reflect improvements in the cost of goods and the manufacturing process. These include re-engineering of the manufacturing process to reduce cost and complexity; new purchasing agreements and bringing more of the manufacturing process in-house. GSK's single, not-for-profit prices are available to a wide range of customers in the United Nation’s list of Least Developed Countries and all of sub-Saharan Africa - a total of 63 countries. They are also available to all projects fully financed by the Global Fund to Fight AIDS, TB and Malaria. Eligible customer groups include governments, non-governmental organisations (NGOs), aid agencies, UN agencies and other international purchase funds. Additionally, in sub-Saharan Africa, employers who offer HIV/AIDS care and treatment to uninsured staff are also eligible for GSK's not-for-profit prices for antiretrovirals. In recent months there have been many important developments in HIV/AIDS, such as the Bush Emergency Plan for AIDS Relief, the G8 commitments on access to medicines, disbursements by the Global Fund and increased focus from the WHO. GSK believes more is required. A significant increase in resources is still needed, and every measure must be taken to prevent diversion and ensure medicines reach the patients for whom they are intended. It is also important to maintain incentives for R&D through protection of intellectual property - for example, there is neither a cure nor a vaccine yet for HIV/AIDS; and existing medicines for HIV/AIDS face the challenge of resistance. Improved healthcare in the developing world can only be delivered if the significant barriers that stand in the way of better access are tackled as a shared responsibility by all sectors of global society - governments, international agencies, charities, academic institutions, the pharmaceutical industry and others. GSK continues to offer its anti-malarials at sustainable not-for-profit prices to eligible customers in the 63 countries, but the prices of these are unchanged because economies of scale have not occurred. GlaxoSmithKline UK Media Enquiries: Martin Sutton David Mawdsley Chris Hunter-Ward 020 8047 5502 020 8047 5502 020 8047 5502 US Media Enquiries: Nancy Pekarek Mary Anne Rhyne Patricia Seif (215) 751 7709 (919) 483 2839 (215) 751 7709 European Analyst/Investor enquiries: Duncan Learmouth Anita Kidgell Philip Thomson (020) 8047 5540 (020) 8047 5542 (020) 8047 5543 US Analyst/ Investor enquiries: Frank Murdolo Tom Curry (215) 751 7002 (215) 751 5419 BASIC FACTS ON SOUTH AFRICA AND ANTI-AIDS DRUGS The South African Competition Commission has recommended that a compulsory licence be issued to allow the country to gain access to generic versions of important medicines, known as antiretrovirals (ARVs), needed to treat AIDS. A compulsory licence is a government authorization to use a patent without permission of the patent owner. Prices The published private sector price of a “cocktail” of ARVs from GSK and BI in South Africa is over R16,000 (about $2000) a year, compared to about R1,500 (about $200) a year for the lowest priced generic treatment. South African Income South Africa has a GDP per person of about R18,000; because of great income inequality, the median household income in South Africa is far less – about R12,000 /year. According to UNDP and World Bank analysis: • The top 10% of the population in South Africa by income collect 46.9% of the nation’s income; R85,076 per person. • The next 10% of income earners (4.3 million people) collect 20% of the national income; R35,466 per person. • The bottom 80% of the population (34.48 million people) earns 33.5% of the national income; R7,578 per person. AIDS in South Africa According to UNAIDS, South Africa has the highest population of people with AIDS of any country in the world. There are approximately 4.7 million people with HIV in South Africa; 12 percent of the world’s people living with HIV/AIDS. AIDS is the leading cause of mortality in South Africa; it is estimated that close to 400,000 South Africans die of the disease each year. Since 1996, combinations of ARVs into treatment regimes known as highly active antiretroviral therapy (HAART) have enabled countries to cut overall deaths from AIDS by as much as 70 percent. Survival rates with HAART in South Africa have reached over 90 percent in some clinical settings. Most sources estimate that less than 30,000 people are receiving HAART in South Africa, although an exact number is not known. The South African government estimates that 400-500,000 South Africans need immediate treatment and that 1.2 million South Africans will need HAART by 2010.