[Ip-health] Merck wants to produce EFV in Brazil

[B.Baker@neu.edu]

Brazil issued a compulsory license on efavirenz, an ARV, shortly after
Thailand had done so.  As reported, Brazil has been importing generic
efavirenz at a fraction of Merck's cost while it has been simultaneously
trying to build capacity to manufacture generic efavirenz locally.  Some
companies, like Abbott in Thailand, like to play hard ball, but other
companies, like Merck, try to stop generic competition by entering into
temporary deals that match generic prices or create public/private
partnerships for local production, even if that means that the innovator
loses money.  In other words, the principle of freezing out generics for
the long haul, especially the established generic industry in India and
especially in richer middle income countries like Brazil, is more important
than short-term loss of profits.

Brazil has improvident entered into pricing deals with Big Pharma
previously.  Earlier in the 2000's, Brazil would threaten to issue
compulsory licenses and then settle for long-term, and ultimately
disadvantageous price discounts that included offers of technology transfer
at the end of the patent term.  Using this strategy, Brazil got locked into
a deal with Abbott Laboratories that might have required it to purchase
lopinavir/ritonavir at over $1600/pppy for several more years, even after
Abbott was forced to lower the middle-income country access price to only
$1000/pppy because of the compulsory license issued by Thailand.  (Happily
for Brazil, it too was eventually offered the $1000/pppy access price.)
Even this price, however, is far in excess of Abbott's low-income and
African access price of $500/pppy - a price that is now nearly matched by
generic producers in India according to recent Clinton Foundation
announcements.

The Merck deal for Brazil is unique because it offers a "partnership"
agreement - essentially a voluntary license - during the life of the
patent.  In this regard, Merck is following the voluntary license practice
that is now common in South Africa where ARV producers routinely grant
voluntary licenses to Aspen Pharmacare to avoid being hauled before the
Competition Commission.  Unlike South Africa, which is permitted in many
such licenses to export regionally, it is highly unlikely that Brazil's
license will allow export to other Latin American countries which still pay
much higher prices to Merck.

Although it is understandable that Brazil should want to increase its
domestic pharmaceutical capacity (and hopefully to do so up to global Good
Manufacturing Practices quality standards), it does not have to give way to
Merck's sweetheart deal if it contains provisions that are less
advantageous than those provided by a compulsory license.  For example, a
properly drafted compulsory license on efavirenz would give Brazil the
right to produce or import fixed-dose combination products containing
efavirenz, such as the current FDC of TFV/FDC/EFV (Atripla).  Importing or
producing such FDC products might ultimately required compulsory licenses
on all of the patented components, but that would be a small inconvenience
compared to the advantage of gaining lower cost access to the new standard
of care for first-line therapies.

It may well be that voluntary licenses will be part of the long term
solution to the crisis in access to medicines, especially if they are
offered to patent pools (like that proposed for UNITAID) that can aggregate
developing country markets and incentivize therapeutically appropriate
formulations.  But, Brazil should not be sweet-talked again (or threatened
behind the scenes) into accepting a sub-optimal public-private-partnership
or licensing deal with Merck or anyone else.

Professor Brook K. Baker, Health GAP
Northeastern U. School of Law
Program on Human Rights and the Global Economy
400 Huntington Ave.
Boston, MA 02115
617-373-3217 (office)
617-259-0760 (cell)