Brazilian President Silva Issues Compulsory License for Merck's Antiretroviral Efavirenz

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Henry J. Kaiser Family Foundation • International News

May 7, 2007

Brazilian President Luiz Inacio Lula da Silva on Friday issued a compulsory license to produce a lower-cost, generic version of Merck's antiretroviral Efavirenz, the AP/Forbes reports (Sequera, AP/Forbes, 5/4). World Trade Organization regulations allow governments to declare a "national emergency" and issue compulsory licenses on any grounds without consulting the foreign patent owner. Brazilian Health Minister Jose Gomes Temporao late last month signed a decree declaring that the country would purchase from an India-based drug maker a generic version of Efavirenz if Merck did not offer the drug at a lower price. According to the decree, Efavirenz is a "public interest" medicine.

Temporao at a news conference last month said the country did not issue the decree "as a threat, nor to lower the price of other medicines, but to guarantee its program of attending (AIDS) patients." Brazil gave Merck seven days to negotiate a lower price for the drug. Officials from the Brazilian Ministry of Health last week rejected an offer from Merck to sell Efavirenz at a 30% discount in the country, an unnamed spokesperson with the ministry said on Thursday. Brazil asked Merck to reduce the cost of Efavirenz to 65 cents per dose from $1.57 per dose. An unnamed source said that Merck offered to sell the drug for $1.10 per patient daily, but Brazil rejected the offer. Merck sells Efavirenz for $1.80 per daily dose in most middle-income countries (Kaiser Daily HIV/AIDS Report, 5/4). According to the AP/Forbes, a generic version of the drug would save Brazil about $240 million by 2012, when Merck's patent on Efavirenz expires.

Reaction
Merck in a statement released Friday after Silva's announcement said that Brazil "has a greater capacity to pay for HIV medicines than countries that are poorer or harder hit by the disease." HIV/AIDS advocates worldwide praised Silva's move, while the U.S.-Brazil Business Council criticized the move as a step backward, according to the AP/Forbes (AP/Forbes, 5/4). Jeffrey Sturchio, a vice president at Merck, said that if Brazil "expropriates our intellectual property, it will have a chilling effect on whether companies research diseases of the developing world and in the long term will have an impact on the poorest countries." Sturchio added that emerging economies, such as Brazil, must help the developed world in covering production costs of new drugs and in funding future drug innovation. Michael Weinstein -- president of AIDS Healthcare Foundation, which operates clinics in Latin America -- said Silva's decision on Friday is a "victory for AIDS [advocates] and patients everywhere and proof that drug companies will go down in defeat every time they place themselves in the way of justice for AIDS patients" (Jack/Lapper, Financial Times, 5/5).

Related Editorial
The compulsory license is a reason to be "downright worried," a Wall Street Journal editorial says. The editorial says that drug patents are "only worth the paper they're printed on unless governments protect them," adding that Brazil's move is a "slap in the face" of WTO regulations and the market system for drug innovation. Developing new medications is a "risky business," and pharmaceutical companies will not be "willing to sink hundreds of millions of dollars into research and development, especially on diseases that affect the poor and sick in developing countries, if they fear their intellectual property will be stolen," according to the Journal. The editorial concludes that if other countries issue compulsory licenses, it "would be bad for intellectual property rights worldwide, and it would be a disaster for the world's poor" (Wall Street Journal, 5/7).

American Public Media's "Marketplace" on Friday reported on the compulsory license. The segment includes comments from Frederic Scherer, an economist at Harvard University; Mark Ravera, an analyst at Strategic Pharma Consultants; and Weinstein (Palmer, "Marketplace," American Public Media, 5/4). Audio and a transcript of the segment are available online.

This document was provided by the Centers for Disease Control and Prevention.
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