Brazil’s Latest Compulsory Licensing Announcement

Michel Lotrowska, a musician and health activist in Brazil, posted this informative note on Brazil’s latest announcement that it was considering a compulsory license on patents for a medicine — in this case, efavirenz, the BMS/Merck AIDS drug marketed by Merck in Brazil.

As noted by Michel and others, the Brazil government is using the threat of the compulsory license to negotiate a lower price from Merck. Most health activists and groups, including Knowledge Ecology International, say that Brazil should forget about the negotiations with Merck, and just issue the compulsory license, and then buy the drug from the lowest price suppliers (of acceptable quality). Why?

First, no one can really say today what the long term best price will be for this drug. Brazil thought they were getting a good price when they previously negotiated a $580 per year price. When Thailand actually did issue a compulsory license, they were able to buy the drug from a Generic supplier for $238 per year.

How low can prices go? With larger economies of scale, this product should be available for less than $400 per formulated kilo, or less than $90 per year, for the 600 mg per day dose. But his will only happen if several large countries buy from generic suppliers. Thailand and Brazil together would make a big difference.

Second, Brazil needs access to generic versions of new fixed dose combinations, like FTC + TDF + EFV, not to mention newer protease inhibitors that are co-formulated with ritonavir. Brazil, a member of UNITAID, needs to create a patent pool for all patents that are relevant for sustaining treatments for AIDS, and ensure that the pool has access to everything, through compulsory licenses if necessary.

Brazil then should negotiate on the remuneration for patent owners. They should not make the mistake of Thailand, and start the negotiation with a royalty rate that is very low, because the world will see this as evidence that the country will not pay a reasonable amount. One possibility would be use the 2005 WHO/UNDP remuneration guidelines, which I wrote. Another possibility would be to set aside a fraction of the budget for ARV purchases for a prize fund that would reward developers of new AIDS drugs, in proportion to the impact of the drug on improving health outcomes. This second approach would be the most innovative, and sustainable, in the longer run, in our opinion.

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