Latin America AdvisorBrazilian President Luiz Inacio Lula da Silva on Friday signed a law to create a 'compulsory license' allowing the government to break drug company Merck's patent on its Efavirenz AIDS drug and purchase a generic version of the drug from other laboratories. What will be the consequences of Brazil breaking the patent? How can drug companies and Latin American governments best ensure access to AIDS drugs while guaranteeing protection of intellectual property?
John Murphy, Vice President for International Affairs at the US Chamber of Commerce: Just days after Brazil was recognized for improving its enforcement of intellectual property (IP) rights, Brazil's decision to issue a compulsory license for Merck & Co.'s HIV/AIDS medicine Efavirenz is a major step backward. Breaking off discussions with Merck and seizing its intellectual property sends a dangerous signal to the investment community. Merck researchers invested hundreds of millions of dollars to develop this groundbreaking medicine. Clearly, there was room to negotiate a solution acceptable to both parties. Ironically, the Brazilian decision comes on the heels of real progress. Last Monday, the Office of the US Trade Representative recognized Brazil's successful crackdown on counterfeiting and piracy, moving the country from the Priority Watch List to the Watch List in its annual Special 301 report. This progress was the critical factor in making possible last December's extension of Generalized System of Preferences tariff benefits. Around the globe, innovative industries are at the core of economic progress, creating high-paying jobs and enhancing competitiveness. Brazil has worked hard to attract investment in innovative industries that rely on IP, and many investors will take this move as good reason to send their dollars, euros, and yen elsewhere. In the end, wealth is made, not found, and development comes only when property—including intellectual property—is respected.
Michel Lotrowska, spokesperson for Doctors Without Borders in Brazil: The compulsory license of Efavirenz is in total compliance with Brazilian and international legislation. It is important to remember that developed countries use the compulsory license for different kinds of technologies on a routine basis and that three compulsory licenses on medicines were recently issued in Italy (two on Merck products and one on a GSK product) without any criticism from the international community. The fact that Brazil followed the steps of Thailand shows that developing countries need to find sustainable solutions to their public health problems and to the ever more expensive prices of newer medicines. The monopolistic pricing policies unilaterally decided by each originator company are not satisfying the policymakers in these countries. Competition is the best way for prices to become affordable, and high prices imposed by companies cannot be a solution for stimulating innovation in developing countries; alternative systems dissociating R&D incentives from prices must be investigated. Pressures from industry will be strong to try to get Brazil to reverse its decision of compulsory licensing, but it seems clear that this decision took years to make, and that a draw-back will not happen. The use of the flexibilities of the TRIPS agreement, reaffirmed by the Doha Declaration on TRIPS and public health by developing countries, is only a sign that developing countries are more responsible for the health of their population, and this should be supported by the international community instead of being criticized by the same countries that signed the Doha Declaration.
Ricardo Camargo Mendes, Executive Director of Prospectiva, a Sao Paulo-based international affairs consulting firm: The main consequence [of breaking the patent] will be that technology-intensive industries will grow wary of Brazil's commitment to create a favorable environment for investments in R&D and innovation. This is particularly bad at a time when several policies are being implemented to promote innovation in the country. The overall cost for Brazil will be much higher than the alleged savings with public health programs. The diplomatic cost of such a measure will also be very high for Brazil. Brazil and other Latin American countries have not been able to define successful policies to ensure a balance between public interests and economic viability for the pharmaceutical industry. Access to AIDS drugs will only be ensured in a sustainable way if the Brazilian government is able to cooperate with research pharmaceutical companies at the same time it creates a favorable environment for R&D (IP protection, education, pro-business regulatory framework, etc.) The Brazilian AIDS program, for instance, should combine public health needs with strategies that aim to promote research centers and companies in the country as part of the international network through which new HIV drugs are developed.
Republished with permission from the Inter-American Dialogue's daily Latin America Advisor newsletter.