Brazil threatens to break drug patent

Brazil said Wednesday it could strip the patent on an anti-AIDS drug produced by German pharmaceutical giant Merck KGaA if the company did not offer Latin America's largest country a deeper discount.

Health Minister, Jose Gomes Temporao signed a decree declaring Merck's Efavirenz anti-retroviral drug a "public interest" medicine - the first step in a process that could lead Brazil to break Merck's patent.

The company now has 10 days to negotiate lower prices with the government, the Health Ministry said in a statement. If the two sides do reach a deal, Brazil could issue a compulsory license which would allow the country to produce the drug generically, paying Merck only a small royalty.

Brazil allows for the issuance of compulsory licenses in cases of a health emergency or if the pharmaceutical industry is deemed to be engaged in abusive pricing.

Efavirenz is the most widely used medication by Brazil's anti-AIDS program which provides free medicines for anyone who needs them.

In 2005, Brazil threatened to break the patent on Kaletra, an anti-AIDS drug produced by Abbott Laboratories Inc., but the two sides reached an agreement and the company's patent was not broken.

In November, Brazil began price reduction negotiations with Merck, demanding the same 0.65 cents per 600 milligram pill the company charges the Thai government. Brazil at the time was paying $1.59 per pill, the statement said.

Merck proposed a 2 percent reduction, which the government turned down.

Brazil has repeatedly managed to win price reductions in recent years from big pharmaceutical companies by threatening to break patents but has never actually done so.

"Merck remains committed to reaching a negotiated agreement with Brazil's Ministry of Health," Amy Rose, a company spokeswoman said in a statement. "The company does not believe compulsory licensing is in the best interest of patients. Mercks focus is to work with the government of Brazil to help achieve its objective of improving treatment for HIV/AIDS patients."