01 June 2007

Putting people's health before drug company profits

Dateline Rio: Brazil is being pilloried for joining the 'Axis of IP Evil' but by breaking Merck's patent on Efavirenz, its AIDS control programme will save $30 million every year.

1 June 2007
The Hindu

Putting people's health before drug company profits

Siddharth Varadarajan

Tucked away inside a nondescript campus on the outskirts of Rio de Janeiro, the silent, gleaming corridors of the Farmanguinhos Drugs Technology Institute have emerged as the latest battleground in the war between Big Pharma and the handful of national governments seeking to prevent monopoly profits from coming in the way of their citizens' health needs.

As a state-run institute, Farmanguinhos manufactures and supplies the Health Ministry's "strategic programmes" with drugs that are freely distributed to the Brazilian population through the country's 'unified health system' (SUS). With more than 180,000 registered AIDS patients and a presidential decree ordering the free supply of medication to them, the Brazilian health ministry spends more than $450 million every year buying anti-retroviral drugs (ARVs). One of these is Efavirenz, a patented drug developed by the U.S.-based company, Merck, and sold to Brazil at $1.56 a tablet or $580 per patient for a year's supply.

With comparable generics available from India for as little as $0.45 a tablet, the Brazilian authorities had long been pressing Merck for a price reduction. Under existing World Trade Organisation rules, including the 2001 Trade-related aspects of Intellectual Property Rights, or TRIPS, agreement, governments have the right to issue a "compulsory license" for patented drugs if there is a pressing public health need, thereby enabling the import of cheaper generics as well as the domestic reverse-engineering of patented formulations.

Merck strung Brasilia along, assuming the threat of compulsory licensing was a ruse. Shortly after winning the national elections for a second time, however, the government of President Luis Inacio Lula da Silva hit back: On April 25, the health ministry notified Efavirenz as a drug of public interest, the first step towards compulsory licensing. Merck finally offered a 30 per cent price cut, which the Brazilian government rejected as inadequate. Finally, on May 5, a compulsory license was issued.

Farmanguinhos and another public laboratory have now begun work on manufacturing the drug and are expected to have a production line up and running within a year. In the interim, the government has said it will buy the requisite quantity of the generic version of Efavirenz from India. The three Indian companies likely to benefit from this are Cipla, Ranbaxy and Aurobindo Pharma.

"The government's decision was really a last resort", Dr. Lauciene Amaral, an intellectual property specialist with Farmanguinhos, told this reporter during a recent visit to the institute. "Merck could have agreed either to a significant price reduction or the transfer of technology. From 2004, in one way or another, this discussion went on. But there was no agreement on either. That is why we had to take this step".

In his public statements, President Lula has been more direct. "It is not possible for anyone to get rich with the misery of others. In a choice between our trade and our health, we will take care of our health," he said in a speech announcing the licensing decision. He also warned that action might be taken in the case of other drugs too. "If the prices are not fair, not only for us, but for every human being infected on this planet, we will have to make this decision".

For President Lula -- who arrives in New Delhi on Sunday for an official visit to India -- this new willingness to confront big drug companies on pricing marks a shift from his earlier policy of seeking only modest concessions. For example, the Brazilian government signed an agreement with Abbott Laboratory in 2005 setting the price of another anti-retroviral, Kaletra, for six years and committing itself not to go in for compulsory licensing for any of the ingredients of this drug. The agreement brought the annual drug cost down somewhat but at $1,380 per patient is much higher than the $500 other countries like South Africa pay.

Not surprisingly, Brazil's push for compulsory licensing is the result of spiralling costs since 2005, caused mainly by the proportional reduction of first-line drug use, which are locally manufactured, and increased second line therapies, all imported and patent protected.

According to the Brazilian ministry of health, the Efivarenz compulsory license will save the country $30 million a year and as much as $237 million by 2012, when Merck's patent expires.

In legal terms, Brazil is not breaking Merck's patent but only suspending it. And a royalty of 1.5 per cent will be paid to the company for all generics sold in the country at the price of $0.45 or lower. Nevertheless, Merck has reacted with anger and outrage. "This expropriation of intellectual property sends a chilling signal to research-based companies about the attractiveness of undertaking risky research on diseases that affect the developing world, potentially hurting patients who may require new and innovative life-saving therapies," a company statement noted.

Roberto Camilo Castrignani, vice operations director for Farmaguinhos, dismisses this argument. "Look, what we have done with Efivarenz is an exceptional thing. But in any case, these big companies don't do much research on tropical diseases like malaria, Chagas' disease, leishmaniasis, tuberculosis and leprosy, which are a big problem for us".

According to Oxfam, developed countries in North America, Europe and East Asia account for 80 per cent of global pharmaceutical sales. The whole of sub-Saharan Africa and South Asia, on the other hand, accounts for less than two per cent of global sales. Thus there is no reason why compulsory licensing by developing countries should have an adverse impact on the incentive of big pharmaceutical companies to invest in R&D.

While Merck maintains a country like Brazil can afford to pay more for its drug than countries which are poorer, Brasilia has taken the fight for lower prices one step further by pushing for a resolution at the recently concluded World Health Assembly in Geneva encouraging governments to address "the linkage between the cost of research and development and the price of medication".

The resolution was passed unanimously after one delegation -- the United States -- walked out. Washington's fear -- and the fear of the big drug companies for whom the U.S. administration always bats -- is that Brazil's decision might prompt other countries to join the slowly expanding 'Axis of IP Evil'. Last year, Thailand thumbed its nose at the U.S., issuing compulsory licenses for three patented formulations, including Efavirenz and Kaletra. China, Cuba. South Africa and India are also considered members of the 'axis', though India's new Patents Act, passed amidst opposition by health advocacy groups in 2005, grants pharma companies considerable leeway as far as patent protection is concerned.

For Brazil and India, increased collaboration in the pharmaceutical sector is a priority area on the bilateral front and at least one Indian drug company, Strides Arcolab, has already established a manufacturing facility in Brazil under the name Cellofarm. But health activists are also looking forward to greater cooperation between the two countries at both the WTO and World Health Organisation. "It was amazing to see how closely the Brazilian and Thai delegations worked together at the WHO's World Health Assembly earlier this week", Dr. Meera Shiva, an NGO observer, told The Hindu. "India must also be in the forefront of the struggle for cheaper drugs and social medicine".

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