The Brazilian government issued a compulsory license last Friday allowing the import of generic versions of efavirenz, after the drug’s patent holder Merck & Co failed to match the 60% price reduction requested.
The Brazilian government says that it has been attempting to negotiate a price reduction with Merck since November 2006. Last month it warned Merck that unless Brazil could buy efavirenz at the same price recently offered to the Thai government, it would issue a compulsory license in seven days time. On Thursday May 3rd the Brazilian government rejected Merck’s offer of a 30% price reduction, and proceeded to issue a compulsory license the following day.
In a statement issued on May 5th, Merck & Co said: “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.”
The Brazilian government has consistently sought lower prices for antiretroviral drugs in order to cap the cost of its national HIV treatment programme, which provides free access to anti-HIV treatment for 180,000 Brazilians. UNAIDS estimates that anywhere between 370,000 and 1 million Brazilians are HIV-positive.
By reducing the price per day from US$1.56 to $0.45 by buying Indian generic products prequalified by the World Health Organization, the Brazilian government said it expects to save $30 million in 2007 and $237 million between now and 2012 (when the efavirenz patent expires).
"From an ethical point of view the price difference is grotesque," said President Luiz Inacio Lula da Silva. "And from a political point of view, it represents a lack of respect, as though a sick Brazilian is inferior," he added.
"Our decision today involves this one drug, but we can take the same steps with any other that we consider necessary,'' Lula told the Bloomberg news agency. ``It doesn't matter if it's a US, German, French, Brazilian or Argentine company."
James Love of Knowledge Ecology International, an organisation which is promoting alternative approaches to intellectual property and public health, predicted 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 $0.24 per day.”
Brazil’s compulsory license is legal under national and international trade law, but has been fiercely criticised by Merck & Co and others.
“This 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,” a Merck spokesperson said.
“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 such, we believe it is essential to price our medicines according to a country's level of development and HIV burden, thereby ensuring equitable access as well as our ability to invest in future innovative medicines."
Daniel Christman of the US Chamber of Commerce said: “Brazil is working to attract investment in innovative industries that rely on IP, and this move will likely cause investments to go elsewhere. Ironically, the Brazilian decision comes on the heels of real progress. Last Monday, the Office of the US Trade Representative recognized Brazil's successful crackdown on counterfeiting and piracy, moving the country from the Priority Watch List to the Watch List in its annual 'Special 301' report.”
Thailand was recently placed on this list following its decision to issue compulsory licenses on efavirenz and Kaletra. Thailand's health minister Mongkol Na Songkhla said last week that Thailand would not be intimidated and would persist in its compulsory licensing actions.
The Wall Street Journal also condemned the Brazilian move in an editorial, saying further compulsory licenses would be "bad for intellectual property rights worldwide, and a [...] disaster for the world's poor."
"It's natural to want an interpretation of international agreements that shows sensitivity to the health concerns of poor nations and poor people," said Ronald Cass, former dean of Boston University School of Law. "But softening IP protections for those who produce life-saving drugs doesn't just hurt drug companies -- it hurts the sick and poor, too.
"The obvious incentive to innovate is the ability to profit from a new invention. That is what intellectual property rights -patents, trademarks, copyrights, trade secrets - protect."
However, James Love of Knowledge Ecology International disagrees, arguing that it is time for a shake-up in the way that intellectual property laws are treated by developing countries.
“At some point, it will be necessary to reassess the business model for medicines in developing countries. Negotiations with patent owners rarely produce affordable prices. Competition is more effective," he said.
"Brazil should go far beyond this single product, and create a system of collective management of intellectual property rights that would extend compulsory license for either all prescription medicines, or a set of essential medicines that includes not only AIDS, but other important health problems, like diabetes, cancer, or heart disease.
“Concerns over R&D should be addressed, but through new thinking about innovation. Brazil should break the link between drug prices and R&D incentives, by introducing innovation prizes that reward drug developers for improving health outcomes in Brazil.”