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Back in 2005, the government of Brazil threatened to break the patent on Abbott's (NYSE:ABT) HIV medication Kaletra if the price didn't come down (see here and here). But after a lot of arm-wrestling, a deal was reached. Now it's Merck's (NYSE:MRK) turn, with their efavirenz, and this time things went all the way: on Friday, Brazil's president issued a compulsory license to produce the drug outside Merck's patent.

My problem with this, other than the obvious problem I have with expropriation of someone else's property, is that Brazil is trying to have things both ways. The government spends much of its time talking about how the country is an emerging power, with the 12th-largest economy in the world, huge natural resources, its own successful aircraft industry and space program, and so on. But when it comes time to pay for HIV medications, which are important both medically and politically, suddenly they're a poor third-world country being exploited by the evil multinational drugmakers. A look back at the second blog link above, with its quotes from Brazil's Minister of Health on how nationalizing drug patents would help the country's industry, shows that this issue probably has more to do with the first worldview than the second one.

During the Kaletra dispute, I asked a question:

I've known some pretty good Brazilian scientists, but the country isn't up to being able to discover and develop its own new ones. (Very few countries are; you can count them on your fingers.) So I've saved my usual justification for last: if Brazil decides to grab an HIV medication that other people discovered, tested, and won approval for, who's going to make the next one for them?

And now Merck is basically asking Brazil the same thing:

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. As such, we believe it is essential to price our medicines according to a country's level of development and HIV burden, thereby ensuring equitable access as well as our ability to invest in future innovative medicines. As the world's 12th largest economy, Brazil has a greater capacity to pay for HIV medicines than countries that are poorer or harder hit by the disease.

This decision by the Government of Brazil will have a negative impact on Brazil's reputation as an industrialized country seeking to attract inward investment, and thus its ability to build world-class research and development.

It should have, anyway. Look, intellectual property law is not pretty, and doesn't give anyone a warm feeling. It's not meant to. But the alternative Jolly-Roger world is even worse, and anything that takes us toward that is a bad move.

Source: Why is Brazil Pirating Merck's AIDS Drug?