TWN Info Service on WTO and Trade Issues (May07/03)

03 May 2007

Brazil Moves on compulsory license after failed talks with drug company
Published in SUNS # 6242 dated 1 May 2007

Geneva, 30 Apr (Sangeeta Shashikant) -- The Brazilian government has declared its intention to issue a compulsory licence for the AIDS drug Efavirenz, if the patent holder, the drug multinational company Merck Sharpe and Dome (MSD), does not adequately reduce its price.

The Ministry of Health revealed that its decision to issue a compulsory license ordinance came after talks with the company failed to lower prices of the AIDS drug.

The Ministerial Ordinance No. 866 dated 24 April 2007 declared that "there exists the possibility of compulsory licensing of patents in the public interest", as provided for in national laws, and decides "to declare public interest in relation to Efavirenz for the purposes of the granting of compulsory licensing for public non-commercial use, in order to guarantee the practicability of the National STD and AIDS Programme, ensuring the continuity of universal and free access to all medicines necessary for the treatment of people living with HIV and AIDS."

The Ministerial Ordinance shall come into force from the date of its publication.

The government has also issued a detailed statement in the form of questions and answers, explaining its move. It has been conducting negotiations since 2006 with Merck over the price of the drug.

Efavirenz is an important drug as it is estimated that 75,000 or 38% of the 200,000 patients having antiretroviral treatment in Brazil will be using it by the end of this year.

According to the Ministry of Health (MOH), despite the increasing number of patients taking the drug, the prices for Efavirenz have not altered much since 2003.

Efavirenz (in tablets of 600 mg) is currently available in Brazil at approximately $580 per patient per year. This is 136% higher than the price offered by the same company in Thailand, where about 17,000 people are taking the drug.

The MOH says that it has received proposals for the supply of Efavirenz (600mg) by generic drug companies at far cheaper prices than the price that Merck has been charging in Brazil.

Generic versions of the drug that have been pre-qualified by the World Health Organisation have been offered to Brazil at between $163.22 and $166.36 per patient per year, or at a cost of $0.4472 to $0.4558 per tablet.

According to the MOH, buying the drug at these lower prices would reduce expenditure on Efavirenz by around $30 million per annum on the 2007 contract, with estimated savings by 2012 (when the patent expires), of $236.9 million.

Issuing a compulsory license is a measure allowed by the WTO's TRIPS Agreement to overcome the patent barrier and enable the supply of cheaper generic medicines either through import or local manufacture.

Where a compulsory licence is issued for "public non-commercial use", as appears to be the intention of Brazil, there is no requirement to engage in prior negotiations with the patent holder.

However, the MOH has said that since 2006, it has been in constant negotiation with MSD to reduce its price, but with no success.

The Ordinance states that "the Ministry of Health undertook, without success, all efforts to reach an agreement with the manufacturer of Efavirenz regarding the prices charged in Brazil, with reasonable terms and conditions to meet the public interest."

The MOH was offered a 2% reduction in price (for the 2007 supply contract) by MSD, which it considered insufficient.

The MOH said that it instead requested that MSD charge prices compatible with the growing use of Efavirenz in Brazil and with the prices that are being charged internationally. It indicated that it would accept the same price offered to Thailand, namely, Efavirenz 600mg for $20.21 per bottle of 30 tablets, being the equivalent of approximately $246 per patient per year.

With regard to the oral solution version of the drug, the MOH said that it would have accepted the prices charged in First World countries, namely, $16.92 per 180ml bottle of 30mg/ml oral suspension.

However, according to the MOH statement, "the company was relentless with regard to the price. Therefore, the discussion came to an end without a satisfactory agreement."

The MOH also mentioned that MSD sets its differential pricing, i.e. between $277.40 and $697.00 per patient per year based on the countries' Human Development Index and/or HIV prevalence, but in calculating the price, other relevant aspects were totally disregarded, such as the extent of the population's 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.

The Brazilian move can be expected to spark a new round of negotiations with MSD. Pharmaceutical companies are known to be more responsive to a government request for significant reduction in drug prices where there is an imminent issuance of a compulsory licence, or following the issuance of a compulsory licence.

MSD offered to the Thai government Efavirenz at $0.72 per tablet of 600 mg (650 baht per bottle), however with several conditions, after Thailand recently issued a compulsory licence for the import and local manufacture of Efavirenz.

The generic Efavirenz imported from the Indian company Ranbaxy at less than half the original price of the patented product meant that the Thai Ministry of Health will be able to provide Efavirenz to 20,000 additional AIDS patients.

MSD also went on to publicly announce a reduction in the price of its HIV/AIDS medicine STOCRIN (efavirenz), to $237.25 per patient per year (from $0.76 to $0.65 per day)  for purchasers in countries in the low category of the Human Development Index (HDI) and in medium HDI countries with an adult HIV prevalence of 1% or greater.

In medium HDI countries with an adult HIV prevalence of less than 1%, it offered a price of $1.80 per day, or $657.00 per patient per year, reduced from $1.91 per day for the same formulation.

Malaysia issued a compulsory license in November 2003 to import generic Didanosine, Zidovudine and Combivir for HIV/AIDS treatment from India. Following this, the patent holders Glaxo Smith Kline (GSK) and Bristol Myers Squibb reduced its price for the patented products by more than 50%.

The Brazilian government has also gone through a similar experience. In 2005, it made a declaration that the Lopinavir/Ritonavir combination (marketed by the brand name Kaletra) was of public interest and on numerous occasions indicated that it would issue a compulsory licence.

This threat of a compulsory licence eventually led to an agreement with the patent holder Abbott for a reduction in the price. The government did not issue a compulsory license.

Brazilian NGOs are strongly supporting the government move. The Working Group on Intellectual Property (GTPI) of the Brazilian Network for the Integration of Peoples (REBRIP) said that it believed that the government would not be once again a "Tiger without Teeth".

Instead, it expects that the government will this time "follow through with its decision to guarantee access to an essential medicine by initially importing cheaper generic versions and later by producing the drugs locally."

The GTPI/REBRIP said that a technical study that it carried out in 2006, as well as other studies by the UN Development Programme and the Clinton Foundation, showed that Brazil had adequate national drug production capacity.

It added that the issuance of a compulsory licence constitutes a historical decision and contributes to the sustainability of the State policy guaranteeing universal access to medicines, demonstrating also the maturity of Brazilian institutions that used to vacillate when facing international pressure.


Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
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