The American Spectator

Special Report

Bad Boys From Brazil

By Doug Bandow on 7.19.05 @ 12:06AM

Drugs offer incredible medical benefits. Everyone wants to take them. Drugs cost a lot to develop. No one wants to pay for them, as Brazil has demonstrated in preparing to steal several pharmaceutical patents.

The tension between access to existing medicines and creation of new ones is particularly stark in poor nations. The regular price of HIV/AIDS treatment regimens exceed per capita incomes in some countries.

Although activists routinely vilify the pharmaceutical companies, only their extensive R&D activities generate the products that keep tens of millions of people alive. Leading companies widely discount and donate their drugs in the Third World and work with charitable groups to build health infrastructure and distribute antiretrovirals.

No good deed goes unpunished, however. Even residents of rich countries don't want to pay for life-saving medicines. Most industrialized states impose one or another set of price controls on drugs, blatantly free-riding on the scientific creativity of American firms.

Other states make even less pretense of respecting the property rights of U.S. drugmakers. Such as Brazil. Despite its manifold economic and social woes, it has the largest economy in Latin America, ranking 11th in the world. Per capita GDP runs about $8,100 -- behind the U.S., but ten or more times that of the dozen poorest African states.

Yet Brasilia believes that other nations -- or, more accurately, companies from other nations -- owe it a medical free lunch. The government wants to save money in its health budget (what country does not?), so it expects to buy AIDS drugs at fire sale prices. Brazil backs up its demands by threatening to steal the makers' patents.

International intellectual property rules allow use of compulsory licensing of patents, but only in public health emergencies. Brasilia, however, has never let juridical niceties stand in the way of forcing down drug prices.

IN 2001 BRAZIL BEGAN THE process of issuing a compulsory license for Viracept (nelfinavir), an AIDS drug, unless Hoffman-La Roche lowered the price. The company accepted a 40 percent cut on its already discounted price.

Two years later Brazil was back, demanding price cuts from Roche, again, as well as Bristol-Myers Squibb and Merck. To back its ultimatum, Brasilia threatened to confiscate the drug patents.

Brazil prepared a formal decree to authorize importation of "any generic medication in case of a national emergency or in the interest of public health." Even more ominously, Health Minister Humberto Costa indicated that Brazil would provide discounted AIDS medications to its Latin American neighbors, opening the international floodgates.

Brasilia's extortion caused the companies to slash the prices of their anti-AIDS drugs. The final cost of Merck's STOCRIN ended up little above that in Sub-Saharan Africa.

Despite its debt problems, Brasilia was not broke. It simply wanted to save cash. Alexandre Grangeiro, coordinator of the Ministry of Health's AIDS program, explained: "We need a price reduction now, because of our budget limitations." Similarly, said Dr. Paulo Roberto Teixeira, Director of the Brazilian National STD/AIDS Programme: "In previous negotiations, we managed to get the prices of these drugs reduced, but now we want to lower the costs even further."

Brazil is wielding the same weapon yet again. Only this time Brazilian officials are demanding that Abbott Laboratories, Gilead Sciences, and Merck turn over their knowledge through "voluntary licensing," allowing Brazil, either through government operations or private manufacturers, to produce generic copies.

Brazil might be a major economic player, but why pay for what you can steal? "Even with recent price reductions that we obtained from drug producers, the total cost of retroviral drugs is growing in an unbearable way," explained Jarbas Barbosa, a health ministry official. (Ironically, early in May Brazil rejected a $40 million U.S. grant for AIDS treatment in protest of the accompanying conditions.)

These are "negotiations" in name only, since Brasilia will accept only one result. Said Barbosa: "We're interested in a fast negotiation. But if we're obliged to use the compulsory licensing we will do so as a last resort."

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