Brazil breaks the patent on Merck AIDS drug

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President Luiz Inacio Lula da Silva on Friday authorized Brazil to break the patent on an AIDS drug made by Merck & Co. Inc. and import a generic version from India instead.

It was the first time Brazil bypassed a patent to acquire cheaper drugs for its AIDS prevention program, a step recently taken by Thailand. Other countries, including Canada and Italy, have also used a clause in World Trade Organization rules to flout drug patents in the name of public health.

Talks over the price of Merck's drug, Efavirenz, broke off on Thursday when the health ministry rejected the New Jersey-based company's offer to cut its $1.59 per pill price by 30 percent. Brazil wanted to pay what Merck charges Thailand, or $0.65 per pill.

"The compulsory licensing of Efavirenz is a legitimate and necessary measure to guarantee that all patients have access to the drug," Lula's office said in a statement.

Representatives of some 200,000 AIDS patients who receive state-sponsored antiretroviral drugs applauded at a ceremony in Brazil's presidential palace, but drugmakers reacted angrily. Merck said it was "profoundly disappointed," calling the decision a misappropriation of intellectual property that would stifle research.

AIDS advocates hailed the decision. "This is certainly an important advance in terms of widening access. We are very happy that Brazil is moving in the right direction," said Michel Lotrowska, who heads AIDS treatment efforts in Brazil for Medecins Sans Frontieres, a humanitarian group.

Free treatment for AIDS patients

Brazil's health ministry has said it plans to import a generic version of Efavirenz from India, paying about 45 cents per pill, and may also start making its own copy of the drug. Under WTO rules, countries can issue a "compulsory license" to manufacture or buy generic versions of patented drugs deemed critical to public health.

Brazil's government provides free universal access to AIDS drugs and distributes condoms and syringes free as part of a prevention program the United Nations has lauded. The program helped Brazil slow infection rates and avoid what experts predicted would become an AIDS epidemic. Infection rates among adults have stabilized at about 0.6 percent -- similar to the United States.

But government spending on anti-retroviral drugs doubled in four years to nearly 1 billion reais ($495 million) in 2005, according to a recent Brazilian report for the United Nations. Supplying a patient Efavirenz for one year costs Brazil $580 compared with $166 for a similar generic drug. Importing the generic drug from India will save $30 million this year and $236.8 million by 2012, the health ministry said.

Drug makers often reduce prices to keep countries as clients and avoid compulsory licensing. Merck said most middle-income countries like Brazil paid $1.80 per pill for Efavirenz. A trade group, the International Federation of Pharmaceutical Manufacturers & Associations, criticized Brazil's decision. "Improved access can only be assured by adequate financing and collaboration with the innovative companies that develop new therapies," the group said.

Lula's decree could also strain relations with the U.S. government, which has threatened to revoke Brazil's trading partner status unless it does more to protect patents. The U.S. Trade Representative's office said it was disappointed that the two sides failed to reach a settlement before Brazil moved to break the patent.