BRAZIL PATENT THREAT PASSES POINT OF NO RETURN

Brazil's announcement that it is to break patents on Abbott Laboratories' HIV/AIDS therapy Kaletra (lopinavir/ritonavir), awaited in recent weeks, appears to mark the point of no return in negotiations with multinational drug firms. However, the motives behind the government's loss of patience with the drug firms -- and its likely consequences -- remain as questionable as ever.

Although a bill confirming the government's powers to compulsorily licence drugs is currently languishing in the Brazilian Senate, the authorities insist that existing laws are enough to justify the violation. Local legislation states that compulsory licensing is applicable wherever "abuse of economic power, unjustified exploitation and failure adequately to meet demand, national emergency or public interest" is adjudged to have occurred.

The government also justifies its decision on the basis of TRIPS and subsequent WTO trade rules. Brazil's 1997 Patent Law also allows for compulsory licensing, although the Kaletra decision is known to be the first of its kind.

Fundamental to these issues is whether Brazil's HIV/AIDS programme actually constitutes an "emergency." The government's scheme treats 170,000 sufferers, but the programme has received international praise for its success. Despite this fact, officials seem convinced that a local HIV/AIDS emergency does in fact exist.

Further, there are suspicions that the move is grounded in ambitions for Brazilian drug sector exports. Famanguinhos, the leading official manufacturer, already accounts for the lion's share of ARVs supplied under the government treatment scheme. The drugmaker can be expected to benefit from the technology transfer, as well as a series of recent export deals with African countries.

Here, the example of South Africa is illustrative. The country's own official ARV treatment programme has a similar budget; Brazil spends approximately BRL945mn (US$397.98) per year, while South Africa's expenditure will total ZAR3.4bn (US$512.67mn) over two years. Although infection rates are exponentially higher in South Africa, the majority of local ARV production -- using products developed by the same multinationals now under threat in Brazil -- is voluntarily licensed to South Africa's internationally successful domestic drug manufacturers.

Meanwhile, it is unlikely that Brazil's move -- and the legal basis for it -- will avoid international scrutiny. The US government's reaction is likely to prove decisive.