[Ip-health] Bridges Weekly: BRAZIL ISSUES COMPULSORY LICENCE FOR AIDS DRUG

[Thiru Balasubramaniam]

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[ Picked text/plain from multipart/alternative ]


BRIDGES Weekly Trade News Digest - Vol. 11, Number 16 9 May 2007

BRAZIL ISSUES COMPULSORY LICENCE FOR AIDS DRUG

Brazil issued a compulsory licence for the patented AIDS drug
efavirenz, in a move that has drawn reactions among public health and
industry representatives. The compulsory licence will allow Brazil to
import and eventually manufacture generic versions of the drug more
cheaply.

The 4 May move by Brazil follows Thailand's compulsory licensing of
efavirenz and two other medicines in recent months (see BRIDGES Weekly,
13 December 2006, http://www.ictsd.org/weekly/06-12-13/story2.htm). In
the aftermath, the patent holder, Merck, reduced the price of its
brand-name efavirenz 'Stocrin' in Thailand and least developed
countries.

Brazil proceeded with the compulsory licence after failing to reach an
agreement with Merck to lower prices. With Brazil seeking a reduction
from its middle-income country price of US$1.57 per tablet, Merck's
best offer amounted to US$1.10, a 30 percent discount, which it said
was "the lowest price of any country with a comparable wealth and
disease burden." However, Brazilian Minister of Health Jos=E9 Gomes
Tempor=E3o said he "told them we needed a 60 percent discount" to come
close to the US$0.65 that Thailand now pays. With the compulsory
licence, generic imports from India will be available for US$0.45 per
tablet.

Efavirenz is currently used by 75,000 of the 180,000 patients that
receive free AIDS drugs from the Brazilian government. The health
ministry says the compulsory licence will reduce costs by some US$240
million between now and 2012, when Merck's patent expires.

Merck says it is "profoundly disappointed" by the outcome, with the
US-Brazil Business Council calling it "a major step backward" that will
discourage investment in Brazil.

Meanwhile, public interest and health groups have lauded Brazil's
actions. James Love, Director of Knowledge Ecology International noted
that "with Brazil and Thailand expanding the market for generic
versions of efavirenz, greater economies of scale should push prices
down further, eventually to less than $.24 per day." On Friday, as he
signed the decree granting the compulsory licence, Brazilian President
Luiz Inacio Lula da Silva said "between our business and our health, we
are going to take care of our health."

TRIPS compliance not questioned

According to the WTO Agreement on Trade-related Intellectual Property
Rights (TRIPS), governments do not need to negotiate with patent
holders prior to issuing a compulsory licence in cases of national
emergency, extreme urgency, government use (though they must provide
them with a royalty fee by way of compensation) or to remedy an
anti-competitive practice. Moreover, the Doha Declaration on the TRIPS
Agreement and Public Health, adopted by the WTO on 14 November 2001,
reaffirmed the right of Members to issue compulsory licenses and the
"freedom to determine the grounds upon which such licences are
granted."

Despite these measures, Brazil negotiated with the patent holder,
Merck, for two years before invoking a three-step domestic legislative
process to grant the compulsory licence for efavirenz. Firstly,
Minister of Health Tempor=E3o issued a decree on 25 April identifying the
procedure as a matter of public interest, one of the conditions for
compulsory licensing under Brazilian intellectual property law. At the
time, he stated that "Brazil is not doing this as a threat, and not
even to lower the price of other medicines, but to guarantee its own
AIDS programme for patients." Secondly, following the initial decree, a
final period of seven days is given to try to arrive at an agreement
with the patent holder. According to Tempor=E3o, the best offer Merck had
tabled in seven meetings over two years prior to this was a two percent
price reduction, but once the compulsory licence procedure was
initiated they made the offer of a 30 percent reduction. The decree
signed by President Lula on 4 May was the culmination of the process,
signalling that negotiations had not reached a satisfactory conclusion
and that a compulsory licence would be issued.

The International Federation of Pharmaceutical Manufacturers &
Associations (IFPMA), whose members include Merck and 25 other
international pharmaceutical companies, responded with a statement
criticising compulsory licensing as "a confrontational approach."

Contrary to some media reports, Professor Peter Drahos of the Law
Programme at Australian National University pointed out that Brazil has
not 'broken' the efavirenz patent, since "the patent has not been
revoked by the Brazilian government" and "Merck will receive royalties
based on its use." While WHO-approved generics will initially be
imported from India, the government news agency 'Radiobras' reported
that a Brazilian government laboratory would produce efavirenz on a
large scale by the end of 2007.

Thailand, Brazil setting precedent?

In the past, Brazil has used the threat of compulsory licences to
successfully reduce the price of AIDS drugs, most recently striking a
deal with Abbott Laboratories in 2005. Indeed, negotiations with Merck
in 2001 and 2003 had previously resulted in price drops for efavirenz.

The compulsory licence issued last week was the first Brazil has
actually carried through relating to pharmaceutical products.
Ironically, it comes just as Brazil was taken off the US Trade
Representative's intellectual property priority watch list for its
efforts to tackle counterfeiting.

There is some concern among industry groups that, along with the Thai
case, a new precedent is being set for the way in which developing
countries handle their public health burdens and access to medicines.
Notably, significant price reductions were offered by pharmaceutical
companies in Brazil and Thailand only with, respectively, the enactment
and implementation of compulsory licensing measures (see BRIDGES
Weekly, 14 March 2007,
http://www.ictsd.org/weekly/07-03-14/inbrief.htm#1). Given its
leadership role among developing countries, the ramifications of the
first Brazilian compulsory licence on pharmaceuticals could extend well
beyond its domestic AIDS programme.

In a further development, former US President Bill Clinton endorsed the
compulsory licences issued by Brazil and Thailand. Standing beside Thai
Public Health Minister Mongkol na Songkhla he said "I strongly support
the position of the governments of Thailand and Brazil and their
decision after futile negotiations." The comments came during an
announcement on 8 May that the Clinton Foundation had agreed deals with
two Indian generic pharmaceutical companies that would halve the cost
of AIDS drugs in middle-income developing countries, and further reduce
prices by a quarter in the poorest.

Any ramifications of these developments could be given an early airing
at the 60th World Health Assembly of the WHO next week, where Thai
Public Health Minister Mongkol na Songkhla has said he will discuss the
compulsory licences in Thailand with several "friendly states" from
Asia, Latin America and Africa. Meanwhile, it remains to be seen
whether Merck will repeat the price drop it offered after the last
compulsory licence it faced in Thailand, now that Brazil has followed
suit.

ICTSD Reporting; "Brasil comprar=EDa a India medicamento gen=E9rico para
sida", ASSOCIATED PRESS, 25 April 2007; "Brazil to Break Patent on
Merck AIDS Drug", WALL STREET JOURNAL, 5 May 2007; "Brazil Takes Steps
To Import Cheaper AIDS Drug Under Trade Law", IP WATCH, 7 May 2007;
"Interview with Minister of Health of Brazil in Folha de Sao Paulo",
BRASILIA FILIAL, 7 May 2007; "Bill Clinton Brokers Deal for Lower AIDS
Drug Prices", REUTERS, 8 May 2007.

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Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
voice +41.22.791.6727
fax +41.22.723.2988
mobile +41 76 508 0997
thiru@keionline.org
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