[Ip-health] Economist on Brazilian Compulsory License

[Mike Palmedo]

http://www.economist.com/world/la/displaystory.cfm?story_id=3D9154222

A Conflict of Goals - Helping patients, or science

The Economist
May 10, 2007

NO DEVELOPING country has had more success in tackling AIDS than Brazil.
The World Bank predicted that by 2000 1.2m Brazilians would carry HIV,
the virus that causes it, but prevention schemes have held the number to
half that. Anyone who becomes infected=97now 200,000 people=97is entitled t=
o
free treatment with anti-retroviral drugs.

That has required successive governments to act robustly towards the
drugs' inventors. In 2001 the health ministry threatened to break a
patent held by Roche, prompting the company to drop its price by 40%.
Last week, for the first time, the government decided to carry out such
a threat. It imposed =93compulsory licensing=94 for efavirenz, produced by
Merck, an American drug company.

Compulsory licensing, which is permitted under world-trade rules, will
allow Brazil to import unbranded copies of the drug at a quarter of the
current price while paying Merck a nominal royalty. The company was
=93absolutely intransigent=94 in negotiations, claims the government. Merck
retorts that it makes no profit on sales to the poorest countries or to
those where more than 1% of adults are infected. Brazil already gets the
lowest price of any middle-income country with a lower infection rate.

Brazil wants to join Thailand, which has issued compulsory licences, in
paying the poor-country price. Merck has offered a price midway between
that and the current price, which costs the government $580 per patient
per year. If all the drug companies' profits come from rich countries,
they will think twice about inventing remedies for diseases that affect
poorer ones, warns Jeffrey Sturchio of Merck.

The dispute is more about saving money than saving lives. The government
complains that patented drugs account for most of the near-doubling in
its spending on anti-retrovirals since 2003. Buying unbranded efavirenz
would save $30m this year. That is modest compared with the $475m spent
on anti-retrovirals in 2006.

Is it worth it? =93No country can progress without investing seriously in
science and technology,=94 Brazil's president, Luiz In=E1cio Lula da Silva,
has declared. Brazil spends just 1% of GDP on research and development.
The breaking of Merck's patent shows that =93if you do innovation you're
running a risk,=94 says Fernando Reinach of Votorantim Novos Neg=F3cios,
which finances technology ventures. Merck says it is =93re-evaluating=94 it=
s
investment in Brazil, its main base in Latin America. Brazil has yet to
put its order into effect. A last-minute deal could save the government
money without turning innovators away.


--
Mike Palmedo
Research Coordinator
Program on Information Justice and Intellectual Property
American University, Washington College of Law
4910 Massachutsetts Ave., NW Washington, DC 20016
T - 202-274-4442 | F 202-274-0659
mpalmedo@wcl.american.edu