Brazil: In the battle for fair agreements

This seemed to be the case between the Brazilian government and Abbott, who in July negotiated a new deal on the price of Abbott's drug Kaletra®.

Brazil has been a shining example for the developing world when it comes to treatment access for its citizens. With some 170,000 infected people, and this number expected to increase to over 200,000 by 2008, thanks to its anti-AIDS program Brazil has been providing drugs free of charge to whoever needs them. Granted sponsoring such a project has its cost –to be more exact in 2004 the annual budget for AIDS treatment drugs amounted to 400,000 million dollars–, nearly 25% of the entire budget spent on drugs.

Within this cost, Abbott's protease inihibitor lopinavi/r (Kaletra®), with an estimated 23,400 people currently taking it, makes up nearly one third of the annual budget. With the number of patients growing the Brazilian government decided to take action, and informed Abbott that if it would not reduce the drug's price by 42% or grant them the ability to produce a generic version of it through technology transfer, they would take the appropriate measures to it. This would be possible by using a compulsory licensing procedure approved by the World Trade Organization (WTO), therefore disregarding the Abbott's patent on the drug.

To the bargaining table
As expected this was not acceptable to the pharmaceutical company and negotiations began in hopes of finding a solution for both sides. Talks came to an end last July 8th, with apparent smiles on both sides of the table. Brazil on one hand had gained the reduction it felt was necessary and for Abbott the price reduction seemed reasonable. Though not all the details were released on the exact change in prices it is said that Brazil would have saved some 260 million dollars over the next six years.

It is known that Brazil was asking for the price per pill to drop from $1.14 to $.68, however representatives from Abbott have declared that the agreement did not specify a change in per-pill price. In fact, the agreement consisted in a gradual price reduction up to 2010, based on a projected increase of patients on Kaletra® from approximately 23 to 60 thousand. Also included was a confusing agreement on technology transfer (for Kaletra®) starting in 2012 only three years before its patent expires. Overall a apparent big victory for Abbott.

The smiles didn't last long
Just a week after the agreement had been made, it was dropped by the Brazilian government. The former Health Minister, Humberto Costa, left the cabinet the same day he announced the deal which was quickly countered by the incoming minister, Jose Saraiva Felipe, who declared that the deal had not been finalized because the agreement was still unfair. The new minister called for more discounts than with the first deal, and also declared that ”breaking the patent has not been discarded as a final alternative.“

Abbott on their side acknowledged that they were interested in closing the first agreement which had been made, but were afraid that political interests may get in the way. Some have said that keeping this agreement in the media would help to take some heat off the scandal at hand. Also it may help to boost popularity rating for the governing Worker's Party, by showing that they have the backbone to stand up to foreign firms. Which in its own way was a diversion tactic by the company in order not to look deeper into the first agreement.

The bigger picture
This particular ability for asking for a compulsory license comes from an agreement within the WTO on medical emergencies and medicines. The idea is that if there is a medical emergency in a country, this country will be able to file for a license in order to combat the problem affordably. Now most of the debate on the subject is on how this power is used.

On one side you have the opinion that if this power is ”abused“ by countries such as Brazil in order to reduce prices it could have a negative effect on the entire drug industry. Mainly, that if such tactics continue they will not put so much money and resources into developing new drugs. The reasoning being that if they spend the money to develop a drug only to have it property rights taken away the cost-benefit ratio will not work out to their favor. This is the most typical and illogical response from companies when reductions in drug prices in the developing world are the topic of conversation.

On the other hand you have the voice of drug treatment access activists who praise the efforts and tactics used by the Brazilian government in order to provide drugs for their populations. The reason being that in reality there is no threat to the financial well being of pharmaceutical companies by these actions. In general, these countries really do not figure into the huge profit markets for the drug companies so why not let those who need the medicines benefits from first world advances. And on top of this the domino effect that the companies are so afraid of is not even logically possible. First of all most countries fear reprisal tactics by the western industry (with the help sometimes of their government) for even trying to ask for such a license. These tactics included possible threats on changing of trade agreements between the two nations, the developing one were the petition is coming from and the developed one where the home office of the pharmaceutical company is, if the petition goes through. Therefore causing stress within the local government, with one side fearing harmful changes in trade agreements and the other trying to provide the needed medicine for the people.

Secondly, the idea that there will be a wave of petitions for compulsory licenses is just absurd for simple reason of money and resources. The fact is that most countries of the world do not have the resources nor the infrastructure to produce these medicines on a large scale if they received a license to do so. Within the developing world there are maybe only three to four countries (this including Brazil) with such ability and most of them are afraid of the overall financial repercussions of using the rights given to them by the WTO. Nobody in their right mind (even pharma executives or western politicians) could suggest that countries like Swaziland, Guatemala or Burma will soon be receiving licenses and direly effect the financial state of the drug industry.

In the end, we can only hope that the efforts by the Brazilian government will pay off and that they will cause other countries to try and use their rights in order to care for their citizens. While at the same time hope that western governments will start to support their developing neighbors in the battle for treatment access instead of protecting the truly unthreatened, at least from the developing world, economic well being of their drug industry.

Charles D. McCarthy

EATN - European AIDS Treatment News, Volume 14, II – Autumn 2005

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