BRAZIL PATENT THREAT HITS MULTINATIONALS' INVESTMENT PLANS

Amid deadlock on negotiations between multinational drug firms and the Brazilian government over the possible compulsory licensing of key HIV/AIDS treatments, some leading firms could scale down plans to invest in local manufacturing.

Although a number of major foreign firms, including Novartis and Boehringer Ingelheim, have recently announced plans to boost local production -- either for export or to target the regional OTC and generics markets -- leading ARV manufacturers have pledged to downscale in Brazil. The Brazilian subsidiary of US-based Merck & Co claims that it will now reconsider investment plans, adding that its Brazilian facility is operating at 30% capacity.

More worryingly, local sources at Merck have added that the Brazilian market does not justify such investment "by itself," especially as the company claims to have already reduced the local price of its ARV Efavirenz by 86% since 2001. Along with Abbott Laboratories and Gilead Sciences, Merck is one of three US drugmakers locked in intense negotiations with the government over its threats to compulsorily licence drugs used in official AIDS treatment programmes.

Merck has mooted the idea of offering its drug at higher prices to wealthier individuals, although this proposal is unlikely to be favourably received by the government. The provisions of TRIPS aside, Brazil's 1997 patent law already gives the authorities sweeping powers to use compulsory licensing, a factor likely to at the forefront of the ongoing negotiations.