Brazil Grants Compulsory License

1 May 2007

Following in Thailand’s footsteps, Brazil has decided to override the patent on an AIDS drug in order to make it available under the country’s free treatment programme.

On 4 May, President Luiz Inacio Lula da Silva signed a decree, which allows the government to import generic efavirenz from India rather than buy Stocrin – the brandname for patented efavirenz – from its US-based manufacturer Merck & Co. Brazil took the step after price negotiations broke down between the company and the government. Merck had offered a 30- percent cut in its current Stocrin price of US$1.59 per tablet, but Brazilian officials held out for a US$0.65 per tablet price, which is what the company offered to Thailand when the government there issued a compulsory license for generic efavirenz (Bridges Year 11 No.2 page 17).

Brazil has previously used the threat of compulsory licensing to pressure companies to lower prices of patented medicines, but efavirenz marks the first time one has actually been issued. Like Thailand, Brazil plans to first import the generic from India (at US$0.45 a pill) and, possibly, start domestic manufacturing later.

Brazil’s free AIDS prevention and treatment programme has won wide-spread praise from UN agencies and health activists. Adult infection rates have stabilised at about 0.6 percent, a level similar to that in the United States. But Brazilian health authorities say spending on antiretroviral drugs doubled in four years to nearly US$495 million in 2005. A years’ supply of Stocrin costs US$580 compared to US$166 for generic efavirenz. Importing the generic from India will save US$30 million this year and US$236.8 million by 2012, the health ministry said.

Mixed Signals from Industry

While health groups, such as Médecins sans Frontières, warmly welcomed the decision, industry representatives responded with great concern. Merck said it was ‘profoundly disappointed’ and that Brazil’s “expropriation of intellectual property sends a chilling signal to research-based companies about the attractiveness of undertaking risky research on diseases that affect the developing world, potentially hurting patients who may require new and innovative life-saving therapies. Research and development-based pharmaceutical companies like Merck simply cannot sustain a situation in which the developed countries alone are expected to bear the cost for essential drugs in both least-developed countries and emerging markets. […] As the world’s 12th largest economy, Brazil has a greater capacity to pay for HIV medicines than countries that are poorer or harder hit by the disease.” Merck added that it hoped the government of Brazil would “reconsider its stance in the interests of HIV patients around the world.”

The International Federation of Pharmaceutical Manufacturers & Associations (IFPMA) said that while compulsory licensing was permitted under specific conditions by the WTO TRIPS Agreement, it was “a confrontational approach, and may be aimed to benefit local government- owned companies’ commercial interests regardless of the local capacity to produce quality, bio-equivalent drugs.” IFPMA also warned that compulsory licensing would create disincentives to the introduction of new medicines in countries that break patents.

Abbot Laboratories announced in March that it would not introduce new medicines to the Thai market after the government issued a compulsory license for Kaletra, a second-line AIDS drug needed by patients who no longer respond to first-line anti-retrovirals such as efavirenz. Nevertheless, the two countries’ compulsory licensing strategies have produced some results. Abbot offered in April to cut the price of Kaletra in low-and medium-income countries, including Thailand, to US$1,000 a patient per year. According to the company, that is cheaper than any generic on the market and 55 percent less than the current price. Merck has proposed to cut Stocrin prices to US$0.65 for Thailand and US$1.11 for Brazil, while Swissbased Novartis offered in April a 75-percent price reduction on its leukemia medicine Glivec after Thai officials said they were looking into a compulsory license for the drug.

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