Wednesday August 22 7:07 PM ET

Brazil to Violate Roche Patent on AIDS Drug

By Shasta Darlington

RIO DE JANEIRO, Brazil (Reuters) - Brazil said on Wednesday it planned to break the patent on an AIDS drug made by Swiss pharmaceutical giant Roche after talks over price cuts failed, in what may be the first patent violation of an AIDS drug in the world.

Brazilian Health Minister Jose Serra said he started on Wednesday the process of issuing a compulsory license to produce nelfinavir, now made by Roche and marketed under the name Viracept, in order to bring costs down 40 percent.

``We tried to get a price cut but we didn't get what we thought was fair so we're going to grant a compulsory license so that it can be produced more cheaply in Brazil,'' he told reporters outside Congress in Brasilia.

``Our idea is to have the medication available in February of 2002,'' he said. A state laboratory in Rio de Janeiro has already completed a copy of nelfinavir.

The Health Ministry says it would be the first time ever that an AIDS drug patent is broken.

Serra said that Roche could still try to come up with an offer ``to meet our needs, but we aren't going to wait anymore, we are starting production.'' He said that more than a quarter of Brazil's AIDS program budget was spent on nelfinavir alone.

Roche offered earlier this year to cut the price of nelfinavir by 13 percent but Brazil rejected the proposal and the two have been in closed-door negotiations ever since.

``Roche is surprised by the news because negotiations between the company and the Health Ministry have been friendly,'' the giant drugmaker said in a press release. ``Roche already conceded discounts close to those that the ministry is requesting and has donated medication for the treatment of children with AIDS.''


Under Brazilian law, the government can issue a compulsory license to make a patented drug when a ``national emergency'' is invoked. The government has repeatedly threatened to issue compulsory licenses on AIDS drugs.

``This is an emergency situation,'' Serra said. ``I'm not going to stop giving this medication to 25,000 people but the only way we can continue ... is if we can lower prices.''

Brazil, which has the highest number of AIDS patients in Latin America with 203,000 registered cases, already makes eight of the 12 drugs in an AIDS cocktail and distributes them free of charge to patients as part of its widely hailed AIDS program.

It started producing the drugs before its 1997 patent law was introduced and so has not faced any legal objections. About 100,000 people are currently treated under the program.

In March, U.S. drugmaker Merck & Co. Inc. bowed to pressure and agreed to slash prices by 65 percent and 59 percent on two AIDS drugs for Brazil rather than face possible competition from locally produced drugs.

The director of the Far-Manguinhos state laboratory told Reuters earlier this week that it had completed a copy of nelfinavir and would be prepared to start making it next year after ``bioequivalency'' tests were carried out. The laboratory would pay royalties to Roche once it started producing.

Far-Manguinhos has managed to cut the price of AIDS drugs by more than 70 percent by producing them in Brazil.

``This will have no impact whatsoever on Roche,'' said Neil Zweig, an analyst at Ryan, Beck & Co.

``It's a relatively unimportant drug for them and Brazil, despite having a large population, in and of itself is not important for Roche any more than it would be for any of the large, foreign pharmaceuticals firms,'' he said.

Still, the United States filed a complaint against Brazil's patent law with the World Trade Organization earlier this year, but withdrew the complaint under pressure from world leaders and health organizations.

Although Brazil has a high AIDS incidence in absolute numbers it has managed to keep infection to less than 1 percent of the population with an aggressive prevention campaign. It has also cut the number of HIV-related deaths in half by producing drugs and distributing them free of charge.

In 2000, the Health Ministry spent $303 million buying drugs from Far-Manguinhos and foreign pharmaceutical companies. Thirty percent of the sum was spent on nelfinavir.

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