Aids activists say GlaxoSmithKline
is to allow the manufacture of cheap generic drug versions in South Africa.
There have been widespread calls for cheaper Aids drugs
Treatment Action Campaign (TAC) says GSK will grant licenses to four generic companies to produce and import AZT andlamivudine - antiretroviral drugs.
Many South Africans have not had access to life-prolonging drugs because of the patents issued by large drug firms.
South Africa's Competition Commission has now said it will not now fine GSK for anti-competitive behaviour.
German drug firm Boehringer Ingelheim has also granted three similar licenses to GSK's, for the production and import of nevirapine in South Africa.
Nevirapine is used to prevent transmission of the HIV virus from mothers to children.
GSK and Boehringer will charge no more than a 5% royalty fee on the sale of those drugs in the country, the TAC said on Wednesday.
The Competition Commission had earlier found GSK and Boehringer had violated a 1998 law by refusing to license their patents to generic manufacturers in return for a reasonable royalty.
Competition Commissioner Menzi Simelane said there would be no fines imposed on GSK.
He said: "We think it is far more important to have broadened access to cheaper antiretrovirals (ARV) for people with HIV/Aids through price reductions by generic manufacturers.
"The introduction of generic substitutes should result in a drastic reduction in the prices of antiretroviral drugs."
He said GSK was making financial sacrifices by licensing the ARVs to generic manufacturers at a royalty rate of only 5%.
The commission had earlier recommended a penalty of 10% of annual sales of the GSK's anti-retroviral drugs in South Africa for each year they were found to have violated the Competition Act.
The October 2003 ruling was issued as GSK announced a price cut for its Combivir Aids treatment in poor countries to 65 US cents a day from 90 cents.
GSK confirmed on Wednesday that the firm had reached an agreement with the Competition Commission and TAC group, and that after a year long-investigation the complaint against the firm would not proceed.
"We are delighted," said a company spokesman.
He said the announcement should answer many of the concerns of the Calpers, the biggest US pension fund, that is putting pressure on GSK.
Calpers - California Public Employees' Retirement Fund - wants GSK to provide a report about the voluntary licensing to generic manufacturers of Aids drugs.
In April the pension fund wrote to GSK chief executive Jean-Paul Garnier asking for a report into the company's Aids-drugs pricing in developing nations within three months.
In its latest letter, due to be posted on 15 December, it says: "As a large shareowner in your company, we expect our
request to be considered seriously and we expect a
constructive and detailed response from you on this issue."
The pension fund, which has $154bn in assets worldwide, has stopped short of threatening to withdraw its shareholding in GSK.