[Ip-health] Q&A from the Brazilian MoH on the Efavirenz CL - official translation from the MoH available on www.aids.gov.br

[MSF Michel Lotrowska]

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Efavirenz:  questions about compulsory licensing



1) What is compulsory licensing?

Compulsory licensing is the permission granted by the State for third
parties to produce the patented product without the consent of its owner, a=
s
long as the legal requirements are met.



2) What is the impact of intellectual property on access to antiretroviral
medication?

Since the 1990s, the growth of the HIV/AIDS pandemic and the coming into
force in January 1995 of the World Trade Organization=92s (WTO)Trade-Relate=
d
Aspects of Intellectual Property Rights Agreement (TRIPS Agreement), have
hindered the action of governments, principally those of developing
countries, with regard to the implementation of medication policies. The
spread of the epidemic imposes the need to adopt measures that include the
treatment of HIV infection and opportunistic diseases, as well as preventiv=
e
measures. According to specialists from several different areas, including
the Nobel prize winner for economics, Joseph Stiglitz, the TRIPS Agreement,
by establishing that all WTO member countries must recognize intellectual
property rights for inventions in all technological areas, including
pharmacology, for a minimum period of 20 years, has enabled pharmaceutical
companies to commercialize their patented products at prices which are ofte=
n
higher than necessary in order to ensure the return on the investment in
research and development, thus having a direct impact on the population=92s
access to this essential property.

            This panorama has resulted in a growing international movement
for access to medication, involving representatives of international
organisms, NGOs and governments. In this quest for greater balance, the nee=
d
to guarantee access to medication has been reiterated in various
international fora, among which stand out the Ministerial Declaration on th=
e
TRIPS Agreement and Public Health =96 known as the Doha Declaration =96, si=
gned
in November 2001, in Doha, Qatar, which reaffirms the right of countries to
implement the WTO=92s TRIPS Agreement in such a manner as to best meet the
interests of public health.

            In this Declaration, the World Trade Organization recognizes th=
e
concerns regarding the impact of intellectual property on the price of
medicines, in addition to admitting that the TRIPS Agreement does not
prevent, nor should it prevent, WTO member countries from taking measures t=
o
protect public health, reiterating furthermore that the Agreement can and
must be interpreted and applied in such a way as to support its member
countries in protecting public health and, above all, in promoting access t=
o
medication.



3) Is compulsory licensing legal?

Compulsory licensing is a flexibility provided for by article 31 of the
Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS
Agreement) which has been used by both developed and developing countries.
It can be implemented in the event of a variety of circumstances provided
for in the Brazilian Industrial Property Law, such as the abusive exercisin=
g
of such rights, the abuse of economic power, absence of local production,
unsatisfactory commercialization, national emergency, public interest. In
the case in question, as previously demonstrated, all the aspects involved
characterize public interest.



4) Why should Efavirenz be subject to compulsory licensing?

          Efavirenz is the most used imported antiretroviral treatment drug=
.
Currently 38% of patients use this drug. It is estimated that by the end of
2007, 75,000 of the 200,000 people undertaking antiretroviral treatment wil=
l
be using this drug. Furthermore, the 2007 purchase schedule, just for
Efavirenz 600mg, at the current price (US$ 1.59/tablet) is equivalent to US=
$
42,930,000, or approximately US$ 580 per patient per year.

The laboratory that owns the patent Merck sets different prices for
different countries based on their HDI and/or HIV prevalence, so that price=
s
vary between US$ 277.40 and US$ 697.00 per patent per year. In Brazil
Efavirenz prices have not altered since 2003, despite the growing number of
patients who are taking it.

            It is also important to note that when calculating the price fo=
r
each country, the company totally disregards extremely relevant aspects,
such as: the extent of the population=92s access to treatment, the absolute
number of patients who take the drug or even if it is used for initial
treatment, as is the case in Brazil.

To provide an example of the difference in the prices charged on different
markets, Brazil has universal access to treatment, which means that
approximately 75,000 people are taking Efavirenz. However, the cost of the
drug is 136% higher than the price offered by the same laboratory in
Thailand, where currently around 60% of those needing treatment have access=
,
representing approximately 17,000 people taking the drug.

The Ministry of Health, based on the understanding that it has fulfilled it=
s
commitment to ensure universal access for all people with AIDS who require
antiretroviral treatment, considered insufficient the proposal to reduce th=
e
price of Efavirenz 600mg by 2% (two percent) for the 2007 supply contract
schedule in virtue of the reductions reported in the media and the prices
that are being charged on the international market by MSD itself. The
Ministry of Health requested that MSD charge prices compatible with the
growing use of Efavirenz in Brazil and with the prices that are being
charged internationally, informing the company that it would accept the sam=
e
price offered to Thailand, namely, Efavirenz 600mg for US$ 20.21 per bottle
of 30 tablets, being the equivalent to approximately US$ 245.88 per patient
per year and approximately US$ 0.65 per tablet. However, as previously
mentioned the company showed itself to be absolutely intransigent with
regard to the possibility of providing a bigger price reduction in Brazil.

It must also be stressed that Brazil has received via UNICEF and PAHA
proposals for the supply of Efavirenz 600mg by laboratories prequalified by
the WHO at prices varying between US$ 12,076,203.60 (US$ 163.22 per patient
per year, or US$ 0.4472 per tablet) and US$ 12,676,842.00 (US$ 166.36 per
patient per year or US$ 0.4558 per tablet). These prices represent a
reduction in expenditure on Efavirenz 600mg alone of around US$
30,000,000.00 per annum on the 2007 contract, and estimated savings by 2012=
,
when the patent expires, of US$ 236,852,000.00[1], based on the price
offered to Brazil by MSD in 2007 compared with the prices offered by WHO
prequalified Indian laboratories, and estimating the number of patients
taking Efavirenz.

It can therefore be seen that in order to ensure and guarantee universal
access to Efavirenz by an ever increasing number of patients, it is
fundamental that there be a significant reduction in price without
contravening rights, seeking to ensure the viability of the National STD an=
d
AIDS Programme.



5) What are the legal requirements for the compulsory licensing of
Efavirenz?

As demonstrated above, all the aspects relating to Efavirenz characterize
public interest. Differently to the other circumstances that lead to
compulsory licensing, public interest (as well as national emergency) must
be granted by a public authority, without prejudice to the remuneration due
to the patent=92s owner.

            This form of compulsory licensing follows a differentiated
procedure, according to which, initially, public interest must be declared
by the Federal Executive Power. Decree No.  3.201/1999 delegates to the
Minister of State of the ministry in question the authority to make such a
declaration.

            Clearly, so as not to breach the rights of the patent=92s owner=
,
in accordance with article 31b of the TRIPS Agreement, and the Brazilian
Industrial Property Law, compulsory licensing based on public interest must
be granted for non-commercial use, non-exclusive production, and temporaril=
y
or, in other words, the period of its validity must be defined, although it
may be extended and remain in force for as long as the public interest
exists. It must be emphasized that independently of this the remuneration
due to the patent=92s owner remains ensured.

            As such, in absolute compliance with the internationally
required precepts, and with prevailing national legislation, the compulsory
licensing of Efavirenz in the public interest is a legitimate and necessary
measure to guarantee access to it by all those patients who are provided
with it through the National STD and AIDS Programme.



6) Were any prior attempts made to negotiate price reduction with the
laboratory?

          Before declaring public interest, the Brazilian Government sought
to negotiate with the company Merck Sharp & Dohme the reduction of the pric=
e
for the 2007 contract in countless meetings. However, the company displayed
no commitment to meeting the national public interest and this resulted in
the breakdown of the negotiations.

            Observing discrepancies in product price and the budgetary
impact that would affect the economic viability of the National STD and AID=
S
Programme, the Brazilian Government began negotiations which took place fro=
m
March 2006 until April 2007.

            During the negotiations, Merck Sharp & Dohme (MSD) proposed a
cooperation agreement for the transfer of technology to Farmanguinhos until
2011, close to the expiry date of the drug=92s patent, with an estimated 12=
%
reduction in its price. However, the reduction relates only to the amount o=
f
tax exemption on the importing of the supplies by Farmanguinhos instead of
Merck Sharp & Dohme, and is therefore not a real price reduction. The
Agreement also established that the supplies should be purchased by
Farmanguinhos from MSD itself. It must be emphasized that the transfer of
technology would only be concluded after 2010, and that prior to this
Farmanguinhos would only perform the primary and secondary packaging of the
product and its respective labelling. The Brazilian Government considered
that none of the aspects of the Cooperation Agreement proposed by MSD met
the national interest and therefore refused to accept it.

            MSD proposed a reduction in the price of the drug of just 2%,
which the Ministry of Health considered to be insufficient, in the light of
the reductions announced by MSD itself in relation to improvements in its
production process, as well as the prices charged on the international
market and the incompatibility with the growing use of Efavirenz in Brazil.

            The Brazilian Government requested that MSD reduce the price of
the drug to the same amount as that offered to Thailand, namely, Efavirenz
600mg for US$ 20.21 per bottle of 30 tablets. In the case of Efavirenz
200mg, the Government requested that the same price percentage per bottle b=
e
maintained as stated above (US$ 24.41). With regard to the oral solution of
the drug, the Government would have accepted the prices charged in first
world countries, namely, US$ 16.92 per 180ml bottle of 30mg/ml oral
suspension. This proposal was not accepted by Merck Sharp & Dohme.

            The company was relentless with regard to the price.  Therefore=
,
owing to the difficulties with the negotiations and the need to purchase
more of the drug, the discussions came to an end without a satisfactory
agreement for the Federal Government being reached.

            It is important to stress that the North American patents=92 la=
w
and clauses of the North American Free Trade Agreement do not stipulate the
need for prior negotiations with the owner of a patent in the event of
compulsory licensing due to public interest.



7) Under compulsory licensing, will patients be at risk of not having the
drug?

          Licensed drugs can be imported or produced nationally.

With the increase in global demand, there are currently seven international
producers of generic versions, three of which (Cipla, Ranbaxy and Aurobindo=
)
are WHO-prequalified).



8) How can the government ensure that generic Efavirenz is of good quality?

Until the drug is produced nationally, the Government will import the
generic drug from WHO-prequalified international laboratories. WHO requires
bioequivalence and bioavailability tests with the aim of ensuring drug
safety, quality and effectiveness.

          As such, there are guarantees that the drug to be distributed in
Brazil will have undergone all the necessary tests to ensure its
pharmaceutical quality.



9) Is the patent=92s owner being harmed?

          Article 31(h) of the TRIPS Agreement states that the owner of the
rights will receive adequate remuneration in accordance with the
circumstances relating to each case, taking into account the economic value
of the authorization. This principle is totally encompassed by the Brazilia=
n
Industrial Property Law.

            Documents produced by the United Nations Development Program
(UNDP) and the World Health Organization, as well as relevant economic
studies and procedures taken by other countries show how the percentage of
the royalties to be paid to the patent=92s owner is to be set. In the speci=
fic
case of the compulsory licensing of antiretroviral drugs the standard
percentage suggested by the UNDP and by the WHO is between 0.5% and 4%.

Below are examples of the percentages most commonly applied by developing
countries in cases of the compulsory licensing of antiretroviral drugs.
Malaysia offered GlaxoSmithKline 4% remuneration for all its patents
relating to antiretroviral drugs. Mozambique established 2% remuneration fo=
r
all patents relating to three antiretroviral drugs (3TC+d4T+NVP). Zambia
granted compulsory licensing and set remuneration based on 2.5% of the pric=
e
of the generic drug. The percentage set by Indonesia and Thailand is 0.5%.
In case Brazil should execute the compulsory licencing, the rights of the
patent's owner in which refers to the payment of the royalties will be
guaranteed.



10) Have other countries already granted compulsory licensing?

The practice of the compulsory licensing of pharmaceutical products is
frequently resorted to by developed countries, such as Italy and Canada for
example, as well as by developing countries. In the case of antiretroviral
drugs, several developing countries have already made use of TRIPS
flexibility, such as: Mozambique, Malaysia, Indonesia and, more recently,
Thailand.






Further Information


Ministry of Health Press Office


Tel: +55 61 3448-8100

Fax: +55 61 3225-7338

Duty mobile phone: +55 61 9962-3752

E-mail: imprensa@saude.gov.br

Portal:  <http://www.saude.gov.br/> www.saude.gov.br





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ASSINE A PETI=C7=C3O DE MSF =93ABANDONE O CASO=94

Hoje milh=F5es de pessoas em todo o mundo dependem dos medicamentos vendido=
s a
pre=E7os acess=EDveis e produzidos pela =CDndia. A empresa farmac=EAutica N=
ovartis
est=E1 processando o governo indiano para for=E7ar a modifica=E7=E3o da lei=
 de
patentes do pa=EDs. Caso a Novartis ven=E7a, uma das principais fontes de
medicamentos vendidos a pre=E7os acess=EDveis para milh=F5es de pessoas em =
todo o
mundo poder=E1 desaparecer.



MSF faz um apelo para que a Novartis ABANDONE O CASO.



Saiba mais e assine nossa peti=E7=E3o AQUI.
http://www.msf.org/petition_india/brazil.html




  _____

[1] Estimation based on a logistical calculation based on the historical
number of ARV patients and the proportion of those taking Efavirenz,
considering upper bounds of 200,000 ARV patients and 60% of patients taking
Efavirenz.

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