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Brazil Threatens To Break Efavirenz Drug Patent
  Brazil AIDS Drug Negotiations Break Down
Published: May 3, 2007
RIO DE JANEIRO, Brazil (AP) -- Brazil moved closer to breaking a patent on a U.S.-manufactured anti-AIDS drug after negotiations with Merck & Co. broke down Thursday.
The government last week declared Merck's efavirenz anti-retroviral drug a ''public interest'' medicine -- a move that effectively gave Merck, based in Whitehouse Station, New Jersey, seven days to negotiate lower prices with the government or have Brazil strip the patent by issuing a compulsory license.
Negotiations began in November with Brazil demanding the same price for efavirenz paid by the Thai government -- 65 cents per 600 milligram pill. Brazil at the time said it was paying US$1.59 per pill.
The United States has since placed Thailand on a list of copyright violators after the Asian country moved to break patents on three anti-AIDS drugs, including those made by Abbott Laboratories and Merck.
In Thailand's capital of Bangkok, AIDS activists rallied outside the U.S. Embassy on Thursday to protest the decision, calling the Thai government's move to break patents on pricey U.S.-made AIDS drugs a ''lifesaver.''
Brazilian officials turned down Merck's offer of a 30 percent discount on the drug.
''We at Merck were disappointed to have had what we consider to be a fair offer rejected by the government of Brazil,'' Merck spokeswoman Amy Rose said by phone from New Jersey. ''We remain flexible, open and committed to the negotiations.'' The matter now will be referred to President Luiz Inacio Lula da Silva's chief of staff who will decide whether to issue the compulsory license and allow Brazil to manufacture the drug or to buy generic versions while paying Merck a small royalty.
Brazilian law and rules established under the World Trade Organization allow for compulsory licenses in a health emergency or if the pharmaceutical industry uses abusive pricing.
Efavirenz is the drug most widely used by Brazil's anti-AIDS program, which provides free medication for anyone who needs it.
Currently 75,000 of the 180,000 Brazilians who receive the free cocktail of anti-AIDS drug use efavirenz.
Brazil has repeatedly managed to win price reductions in recent years from big pharmaceutical companies by threatening to break patents, but has never actually done so.
In 2005, Brazil threatened to break the patent on Kaletra, an anti-AIDS drug produced by Abbott Laboratories, but later reached an agreement.
Merck spokeswoman Amy Rose said the company remained flexible and open to negotiations, and had offered the Brazilian government a 30 percent discount on Efavirenz at $1.10 per pill.
"We would be profoundly disappointed if Brazil goes ahead with a compulsory license," Rose said in an interview.
FDA Week - May. 04, 2007
Brazil's Minister of Public Health Jose Gomes Temporao initiated procedures that might lead to the compulsory licensing of the patent for the HIV/AIDS anti-retroviral drug Efavirenz, which is produced by Merck & Co, a U.S. company. The minister signed a decree published April 25 that declares Efavirenz to be of "public interest," which is the first step towards issuing a compulsory license, a Brazilian official said.
Brazil's move follows Thailand's decision to issue a compulsory license for the same drug in November 2006.
According to the official, once the order is issued the government and the patent holder have seven days to negotiate. After this time period, Brazil can elect to issue a compulsory license, under which the patent holder must license its patent to the Brazilian government. Once under compulsory license, the government would be free to import cheaper generics of the drug or produce it itself, provided the drug is for public, non-commercial use.
Conditions under which a compulsory license may be issued without a "reasonable period of time" of negotiations with the patent holder are outlined under the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement of the World Trade Organization in Article 31.b, and include cases of "national emergency or other circumstances of extreme urgency," as well as public non-commercial use.
Further, the Doha Ministerial Declaration on TRIPS states that each member has the right to determine what constitutes a national or extreme emergency, including public health crises related to HIV/AIDS. Both Brazil and Thailand maintain their moves are compliant with international law, sources said.
An informed source said officials from the Brazilian embassy met with the U.S. Trade Representative's office the day the decree was published, and that while the United States expressed appreciation for the notification, no further reaction from the United States was clear.
A Brazilian agency reported that a Merck representative in Brazil responded to the government's move by saying he was "surprised" because the company believed it was in the middle of pricing negotiations with Brazil.
Sources said that while Brazil has used the threat of compulsory licensing to negotiate lower drug prices in the past, Brazil has never actually issued a compulsory license order. Thailand, on the other hand, got a compulsory license for Efavirenz in November 2006, and in January added another HIV/AIDS drug, Kaletra, and an anti-blood clot drug, Plavix.
On March 20, Sens. Joseph Lieberman (I-CT), Dianne Feinstein (D-CA) and three other senators sent a letter to USTR Susan Schwab taking issue with Thailand's compulsory licensing of non HIV/AIDS related drugs. "Recent actions by the Thai Ministry of Health demonstrate its intent to expand this compulsory licensing program to include nearly a dozen medications to treat high cholesterol and other conditions wholly unrelated to any urgent public health issue," the letter stated. A similar letter was sent by 12 members of the House on March 15.
However, in January, 22 House members sent a letter in support of the Thai government's action on Efavirenz. Schwab responded with a letter which stated that USTR respects the Thai governments ability to issue compulsory licenses under its own laws and obligations under the WTO, and that it had previously indicated to the Thai government that it would be "appropriate" to respond to requests for discussions from stakeholders.
Benjamin Krohmal of Knowledge Ecology International said the letters in protest of Thailand's move centered around the compulsory licensing of Plavix, a drug which helps reduce heart attacks and strokes. Krohmal said that critics charge Plavix does not fit into the definition of a drug needed for public health emergencies, and that compulsory licensing threatens U.S. drug researching jobs. However, since Plavix is owned by Sanofi-Aventis, a French company, he predicted a larger U.S. backlash against the move would be unlikely.
Sources agreed that there was some pressure on Thailand from USTR when the first compulsory license was issued in November, but since then it seemed the administration was quiet on the issue. Sources also said American pharmaceutical companies were lobbying heavily on this issue, particularly among Democrats, though they were not clear on how much traction the issue would get in Congress.
USA For Innovation, a non-profit dedicated to protecting intellectual property, issued a long letter to Schwab in protest of Thailand's action on April 23. The letter charged that Thailand did not make enough efforts to negotiate with patent-holders before taking action, and that Thailand's interpretation of its own laws and TRIPS "opens the door to compulsory licenses for any medication."
The letter concludes by urging Schwab to consider revoking Thailand's benefits under the Generalized System of Preferences (GSP) program and elevating it to the Priority Watch List of USTR's Special 301 Report.
Activists say:

The following is a statement of Robert Weissman, director, Essential Action:
Developing country governments must decide whether to let themselves and their people be held hostage by brand-name companies holding patent monopolies -- monopolies granted by the governments themselves -- or to act to make important medicines affordable and available to their people.
Today, in announcing a compulsory license on the important HIV/AIDS product efavirenz, Brazil finally decided it no longer wants to be held hostage.
Congratulations are due to Brazil, and especially to the Brazilian activists and public health advocates who have long toiled for this day.
Brazil's initiative is a crucial step to help the country maintain its effective program to treat people with HIV/AIDS, the viability of which is threatened by high brand-name prices for second-generation drugs.
It will also have major beneficial externalities. Brazil's substantial market will help create economies of scale for generic makers of efavirenz, and -- combined with the generic market created by Thailand's issuance of a compulsory license on efavirenz late last year -- will drive down generic prices on a global basis.
Following the breakthrough initiatives of Thailand late last year and earlier this year, Brazil's action will also help demonstrate the viability and importance of compulsory licensing.
It is time for developing countries to exercise much more aggressively the flexibilities they have fought to maintain in international trade rules, and not just for HIV/AIDS drugs. The only sustainable way to drive down prices is through generic competition.
Although they have grudgingly conceded some ground in the terrain of HIV/AIDS, Big Pharma's preference is to maintain a single global price for its medicines. That means, plain and simple, that most people in the world -- and the vast majority in the developing world -- cannot afford brand-name products. Every person should view that as intolerable.
Countries cannot easily overcome the problems of poverty, but they can easily address the problem of artificially high drug prices maintained by patent monopolies. Thailand, Malaysia, Indonesia, Zambia, Malawi, Ghana, Eritrea, Mozambique, South Africa and others -- and now Brazil -- have shown the way.
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