But, as a result of the case, it is now under greater pressure than ever to provide the drugs of which it frequently questions the efficacy and safety.Last night in a statement, Ms Tshabalala-Msimang pledged to set up a “pricing committee” to “gather pharmaceutical intelligence”. She also said she would “activate a system of generic substitution” so that South Africans with medical insurance could have access to copies of brand drugs.It is understood that the agreement to drop the case was reached at high level talks between Kofi Annan, the United Nations Secretary General, President Mbeki and the heads of drug companies. Mr Annan’s involvement indicates that South Africa may join a UN scheme under which drug companies strike deals directly with governments. This month, Mr Annan won the agreement of six drug companies to accelerate price cuts.Last night, GlaxoSmithKline, the world’s principal producer of drugs to treat Aids-related illnesses, said the outcome of the action was a victory for both sides. The company’s director in South Africa, John Kearney, said that it was now up to the South African government to deliver drugs to its people. “It is a government policy issue and one we cannot push,” he said.. The drug companies’ climbdown in Pretoria represents a moral victory for the Third World.

But economists stressed yesterday that African countries ­ home to 90 per cent of the world’s 36 million HIV carriers ­ will not be able to afford Aids drugs, brand-names or copies, without help from taxpayers in the northern hemisphere. The drug companies’ climbdown in Pretoria represents a moral victory for the Third World. But economists stressed yesterday that African countries ­ home to 90 per cent of the world’s 36 million HIV carriers ­ will not be able to afford Aids drugs, brand-names or copies, without help from taxpayers in the northern hemisphere.In the face of this, Kenya and South Africa are attempting to develop vaccines ­ specific to Africa’s HIV strains ­ and Jeffrey Sachs, the Harvard development economist, earlier this month handed the Bush administration a blueprint of a plan to get Aids drugs into African hands.Mr Sachs, supported by 127 other Harvard economists, argued that a global trust fund must be established to combat the pandemic. “What is missing right now is the international donor funding,” he said.Mr Sachs’s blueprint would initially help around one million patients at a cost of $1.1bn and seek to triple numbers by 2006.He said: “The US is a $10 trillion economy, so $1bn is about one cent out of every $100 in our economy. To save five million lives a year and a continent that is dying, that is an incredibly modest effort.”. The decision may mean humiliation for the world’s largest pharmaceutical companies but it triggered celebrations at Cipla, the Indian generic drug manufacturer, which startled the world two months ago by offering triple-drug HIV therapy for less than $1 a day.

The decision may mean humiliation for the world’s largest pharmaceutical companies but it triggered celebrations at Cipla, the Indian generic drug manufacturer, which startled the world two months ago by offering triple-drug HIV therapy for less than $1 a day.The settlement by the pharmaceutical giants in their case against the South African government is a vindication of Cipla’s strategy of offering cheap drugs to the world’s poor, in defiance of patent law.The company makes cheap copies of drugs that are patent- protected in other countries and exports them. Its HIV drug cocktail of stavudine, lamivudine and nevirapine was offered to the aid charity M?cins Sans Fronti?s at US$350 (£244) per patient per year. The same combination in America costs $10,400 a year.Cipla is able to carry out its trade, which would be illegal in most Western countries, because, under Indian law, only manufacturing processes, not the products themselves, are covered by patents. Many countries, including Britain, have generic drug manufacturers producing drugs whose patents have expired, normally after 20 years, at a fraction of their original price. Patents allow drug manufacturers to sell their drugs at a higher price to recoup their huge research and development costs.Among the famous drugs sold by Cipla are Erecto, its version of Viagra, Nuzac (a version of the antidepressant Prozac), and Forcan (a copy of the anti-fungal Diflucan). Not surprisingly, Cipla has incurred the wrath of the global drug industry.

The Pharmaceutical Research and Manufacturers of America (PhRMA), has called India’s licensing practices “infamous” and said Indian patent law was “designed to punish importers of patented technology into India”.Yusuf Hamied, Cipla’s chairman, was in triumphant mood yesterday. “The multinational drug companies withdrew their case because they knew they had no chance of winning it,” he said “South Africa should set an example. Developing countries need permanent compulsory licensing for drugs to treat diseases like Aids, malaria, tuberculosis and leprosy. They should not mind paying royalties to multinational drug companies for the right to make their patented products.”Asked if Cipla would benefit from the ruling, Mr Hamied said margins on drugs sold in South Africa were low “There’s no real money in it,” he said. Cipla’s shares rose 0.7 per cent to 1,017.85 rupees on the Bombay Stock Exchange.. As the coast road sweeps down into Port Lincoln, a small fishing port on the remote Eyre Peninsula in South Australia, you pass an extravagantly ornate black and gold gate crowned with the initials “AB” in curlicued letters.