Overview of the Compulsory Licensing Process in Brazil

AssociaÁ„o Brasileira Interdisciplinar de AIDS
July, 2005

As you may know, the Ministry of Health of Brazil has issued a decree in June 2005, declaring the lopinavir/ritonavir combination (Kaletra‚) as a Public Interest medicine. This decision is totally legal, based on the flexibilities accorded in the TRIPS Agreement, emphasized in the Doha Declaration, and does not represent any breach of international agreements on Intellectual Property Rights, which are fully respected by the Brazilian government. This decree was supposed to be a first step towards issuing a compulsory license, but the Ministry of Health also sent Abbott a letter including a ten-day deadline, allowing the company to propose price reduction of the combination and technology transfer of its manufacturing process. Otherwise, the compulsory license would be issued. Abbott presented a gradual price reduction proposal up to 2010, foreseeing an increase on the number of patients from around 23 to 60 thousands in this period. Additionally, the company would offer the technology transfer from 2009 onwards, only 6 years before the patent expires in Brazil.

Abbott's proposal does not benefit Brazil, as it limits its local manufacturing capacity, creating a market niche for this product, and guaranteeing the monopoly until the patent expiration. Briefly, the main hindrances are described below:

  1. Market protection in Brazil. Although Kaletra‚ will be available for all patients in Brazil, the price will only drop from 2006 on and very gradually, requesting an unrealistic double-folded consume within the Brazilian market. Presently, only two thousand new patients are starting the use of Kaletra‚ per year. In order to reach 60.000 by 2010, it would be necessary to prescribe Kaletra‚ for patients that, in fact, would not need it. So the benefit in six years will only happen if the number of patients really increases, which is not expected to happen, neither is necessary.

  2. Lack of short-term benefit drop in price. By keeping high-prices in Brazil, Abbott will also be able to keep high prices in middle-income countries which have smaller markets. The fact that Brazil, the largest market amongst the middle-income countries, won't have a dramatic cut in price before at least 4 or 5 years, will dramatically restrict the room of maneuver of other developing countries in the price reduction negotiations. In 2006, Brazil would have to pay US$ 0,99 per capsule, a value much higher than the price considered by WHO as fair and even by Far-Manguinhos, the official laboratory of the Ministry of Health and potential local manufacturer of the generic medicine.

  3. "Virtual" Technology Transfer. As the Abbott proposal only assumes the transfer of technology starting on 2009, and considering that the Kaletra‚ patent in Brazil expires in 2015, there wouldn't be a significant benefit, since that Far-Manguinhos has the appropriate technical conditions to start the production in 2006. The deal simply maintain the existing monopoly and, at the same time, promotes additional payment for royalties due to the technology transfer.

For these reasons, it remains clear that the compulsory license and local manufacturing of the combination lopinavir/ritonavir produced by Abbott are the only feasible alternatives to obtain price reduction of the drug, and, at the same time, to create more alternatives for middle income countries to ensure second line treatments for all patients in need. The same applies for the other drugs which technical capacities for local manufacturing is already possessed by Brazil, which are tenofovir and efavirenz, that are still protected under patents. By issuing the compulsory license of these drugs, Brazil should be in conditions to manufacture the whole manufacturing process, it means, since the raw material synthesis until the formulation of the final product.

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