And so what began with an act of defiance by a military government in Bangkok is now threatening to become an international trend.

Brazilian President Luiz Inacio Lula da Silva has issued a “compulsory license,” overriding the patent on Merck’s Efavirenz AIDS drug. The move came just one day after talks broke down. Merck offered a 30 percent discount, to $1.10 per day, from $1.57, but Brazil wants 65 cents. “Between our business and our health, we are going to take care of our health,” he said after signing the decree.

In a statement, Merck execs say they are “profoundly disappointed” and maintain they attempted to negotiated in good faith. “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…

“Research and development-based pharmaceutical companies like Merck simply cannot
sustain a situation in which the developed countries alone are expected to bear the cost for
essential drugs in both least-developed countries and emerging markets.”

A key question now is which other countries will follow suitl. Malaysia, for instance, has made noise about issuing compulsory licenses. And poorer nations are only likely to be emboldened by this latest action. This scenario may cause a huge problem for drugmakers, which will almost certainly be accused of harsh indifference to poor, sick people if meds are withheld.

Brazilian law and rules established under the World Trade Organization allow for compulsory licenses in certain circumstances, such as a national health emergency. Thailand cited this rule when issuing licenses for three drugs several months ago.

That step brought the patent fight between less-developed nations and big pharma back into the spotlight. Abbott retaliated for the license issued for its Kaletra AIDS drug by refusing to sell new meds to Thailand, including a new heat-resistant version of Kaletra. Abbott also offered to lower its price on the existing version, but only if Thailand withdrew the compulsory license.

Earlier this week, the US Trade Rep added Thailand to its priority watch list for failing “to
provide an adequate level of intellectual property rights protection or enforcement, or market access for persons relying on intellectual property protection.” Ironically, Brazil was lowered a notched to regular watch list for making progress on the same score.

The US Chamber of Commerce says today’s move send a “dangerous signal to the investment community…The bottom line is this: Brazil is working to attract investment in innovative industries that rely on IP, and this move will likely cause investments to go elsewhere.”

Brazil has threatened several times to bypass patents, but has always reached a last-minute agreement with drug makers, including Merck several years ago. The country provides free AIDS drugs to anyone who needs them and manufactures generic versions of several drugs that were available before Brazil enacted intellectual property laws in 1997 to join the WTO.

But as newer drugs have emerged, costs ballooned and officials warned that without deep discounts, compulsory licenses would be needed. Efavirenz is used by 75,000 of 180,000 Brazilians who receive free AIDS drugs from the government. The drug currently costs about $580 per patient a year. The Health Ministry says a generic version would save $240 million between now and 2012, when Merck’s patent expires.

Jamie Love, who heads Knowledge Ecology International, an advocacy group that tracks patent issues and is critical of the pharmaceutical industry, says “Negotiations with patent owners rarely produce affordable prices. Competition is more effective. Concerns over R&D should be addressed, but through new thinking about innovation. Brazil should break the link between drug prices and R&D incentives, by introducing innovation prizes, that reward drug developers for improving health outcomes in Brazil.”

Further reading…

US Trade Rep report;
Knowledge Ecology International report on other compulsory licenses.[tags]Brazil, Compulsory Licensing, Efavirenz, Generics, Merck, Patents, Thailand[/tags]