Bullying the Boss? Compulsory Licensing for Antiretroviral Drugs in Brazil and Thailand

| October 21, 2011 | 0 Comments

By Shaira Bhanji
Global Health Finance Columnist

Image courtesy of http://www.dtsc.ca.gov

Underdeveloped, HIV-burdened regions of the world have the potential to make strides toward better survival outcomes, but they lack key resources. Simple antiretroviral drugs such as Efavirenz and Kaletra have been shown to lower deaths from HIV/AIDS by as much as 84 percent, yet the prices of these brand name drugs prohibit developing countries from purchasing them.[1]

However, a few countries such as Brazil and Thailand have found a way to benefit from pharmaceutical innovation at a much lower cost by demanding the license to develop generic versions of patented drugs without the consent of pharmaceutical companies—a controversial strategy known as compulsory licensing. Unfortunately, for pharmaceutical companies, compulsory licensing can make doing what they do best—providing powerful drugs with stupendous effects—disadvantageous to the future stability of their company.

What initially seems like a breach of moral obligation on the part of the pharmaceutical industry is in reality a much more tangled web of interests. It comes down to a tug-of-war between pharmaceutical companies’ need for revenue to offset astronomical research and development costs and developing countries’ struggles to compensate the industry through such sky-scraping prices.

In Brazil, Merck & Co. has a patent effective until 2012 on Efavirenz. High-profile disputes about exorbitant prices forced Merck to offer a 30 percent price drop from $1.59/pill to $1.10/pill. Brazilian authorities, however, complained of price discrimination, citing Thailand’s price of $0.65/pill, and resorted to compulsory licensing instead. As a result, Brazil now makes its own generic version of Efavirenz, saving $30 million in 2007. [2],[3]

The Efavirenz pill. Image courtesy of www.aidsinfo.nih.gov.

At first, it would seem that pharmaceutical companies are charging less developed countries unduly high prices. However, the best drugs require costly and extensive research and clinical trials. The total average cost of developing a new drug is more than $1 billion over the course of 15 years of research and testing. [2],[4] Compulsory licensing allows generic companies to charge less for generics, because pharmaceutical companies have already done all of the requisite research for them.

Brazil and Thailand argue that they cannot pay because of their status as lower-middle income countries. However, the World Bank defines both as upper-middle income countries. [5] Furthermore, Brazil pays more because it has a higher per capita GDP than Thailand.[6] Indeed, it can be argued that countries like Brazil and Thailand want the benefits of cutting-edge research but refuse to pay the bill.

Exorbitant drug development costs and the risk that countries will not even pay mean some companies lose their incentive to serve these countries and withdraw future drugs, as was the case with Abbott Laboratories in Thailand.[2],[3] A lose-lose situation ensues, in which countries forgo the potential benefits of life-changing drugs and pharmaceutical companies jeopardize their public image by being seen as unethical.

The world’s best minds have fruitlessly struggled to come up with a solution to this problem. While each country has the duty to look out for its own, compulsory licensing hinders pharmaceutical companies from helping many countries around the world. The terms under which countries are allowed to issue compulsory licenses must be revised to close loopholes so that it is not used as a bargaining pitch, and a third party would be instrumental in bringing both groups to the table. While the possibilities for negotiation are endless, both parties must first agree to get started.


*Acknowledgements: I would like to acknowledge my colleagues in Professor David Cutler’s The Business and Politics of Health class at Harvard University for their valued inputs.

[1] CASCADE Contribution. “Determinants of survival following HIV-1 seroconversion after the introduction of HAART.” The Lancet. Volume 362, Issue 9392 (2003): 1267 – 1274.

[2] Cutler, David. EMR20 Policy Exercise 1 – Compulsory Licensing. 2011. PDF. “Empirical and Mathematical Reasoning 20: The Business and Politics of Health.” Harvard University.

[3] “AIDS DRUGS: Brazil, Thailand Override Big Pharma Patents.” MÉDECINS SANS FRONTIÈRES – UK. Web. <http://www.msf.org.uk/AIDS_DRUGS_Brazil_Thailand_override_big_pharma_patents.news>. 15 October 2011.

[4] “Drug Discovery And Development.” PhRMA. Web. 16 Oct. 2011. <http://www.phrma.org/research/drug-discovery-development>.

[5] “Country and Lending Groups | Data.” Data | The World Bank. Web. <http://data.worldbank.org/about/country-classifications/country-and-lending-groups>.

[6] The World Bank. World Development Indicators Database. Gross National Income per Capita 2010, Atlas Method and PPP. 2011. PDF. Web.

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