The world’s biggest pharmaceutical companies backed out of a landmark court battle over cheap, non-branded anti-Aids drugs.

The 39 firms had brought legal action to fight legislation which would allow generic versions of their patented drugs being made in or imported to South Africa.

They argued such a move would threaten future Aids research. However, the South African Government argued that it desperately needed cheap medication to help the 4.7 million South Africans infected with HIV or Aids.

Under rules laid down by the World Trade Organisation, governments are allowed to issue compulsory licenses that allow generic drugs to be manufactured, or allow “parallel importation” of cheaper drugs. But the drug companies challenged this in their lawsuit.

The case turned into a public relations disaster for the pharmaceutical industry which was accused of putting profit before the lives of millions of people in the developing world.

The firms involved in the court action did not impose any conditions for dropping the case. A spokesman for GlaxoSmithKline said South Africa had made a commitment to respect international law on drugs patents.

During the hearing, which lasted less than a minute, the companies also said they would meet the South African Government’s legal costs.

The new settlement was hopefully to be a blueprint for future relations between pharmaceutical companies and governments in the developing world.

About two thirds of the 40 million HIV positive people in the world are Africans.

Mr Mbeki has caused controversy in the past by insisting the HIV virus is not the primary cause of Aids – a view which runs contrary to mainstream medical opinion.

After dropping the case, pharmaceutical companies agreed to sell Aids drugs at cost price in developing countries – a discount of up to 90%.
In October 2001 GlaxoSmithKline gave permission for low-cost, generic versions of its anti-Aids drugs to be manufactured by a South African drugs company.

But the company is not allowed to profit from the sale of the drugs or export them to any other African country.

In July 2002 Aids campaigners in the United States began action against GlaxoSmithKline accusing it of overcharging for its antiviral drugs.

The lawsuit was part of a campaign in rich countries to make drugs companies slash prices there as well as in the developing world.