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Second Shoe
Doha Dance Has Health Ministries Scheming to Provide Care -- Without Pissing Off Uncle Sam

By Anne Christine d'Adesky

September 2003

Does Paraguay Dare?

Talk about your nail biter. After token concessions to agricultural subsidies and quotas, trade ministers from around the world spent the six days leading up to Labor Day weekend at the Geneva HQ of the World Trade Organization ironing out a deal on new rules for the importation of generic medicines. With the 5th WTO Ministerial scheduled to kick off in Cancún on the 10th of September, the pressure was on to cough up at least some preliminary concessions worthy of the trade talks' optimistic appellation: the Doha "development round."

Last they met (December 2002), even the protectionist steeped EU and pharma rich Switzerland had agreed to life-saving patent concessions for generic imports. But in a one-country-one-veto consensus-based system, a simple nay say from steel eyed Uncle Sam (served its marching orders by the omnipotent U.S. pharma industry) was all it took to put the kibosh on the drug access proposal. (Yes, that would be the same pharmaceutical cabal that recently announced it was withholding drug stocks to any Canadian pharmacy caught doling out meds to cash strapped U.S. seniors as they disembark cross-border buses in a desperate attempt to fill their prescriptions while keeping food on the table.)

Back on Lac Léman, teaser news releases from closed door hearings throughout the week had it that India, Brazil, Kenya and South Africa banded together in order to hold the Yankees imperialists' feet to the fire. U.S. trade representative Robert Zoellick again found himself in the precarious position of advocating for the South.

As the week progressed, an agreed upon resolution seemed increasingly inevitable. If southern generic producers promised not to interpret the TRIPS loosening as carte blanche to flood the international market with cheap drug copies, WTO rules would be amended to allow poor countries facing (infectious) health emergencies (e.g., TB, malaria, AIDS) to import copy-cat meds from countries with the technological know-how.

By the end of the week, a resolution seemed so close that more than a few jittery dailies jumped the gun and declared victory in their Friday (8/29) print editions. But in the wee hours (1 a.m.) Friday morning, everything collapsed. This time, trade ministers from the Philippines, Argentina and Venezuela had balked. Of course, by Sunday (8/31) a deal of sorts had been signed, and there was a general sense that the risks of another PR catastrophe might be averted when they re-assembled at Mexico's Gulf coast -- Oxfam's and others' accusations of window dressing notwithstanding.

The end result approached a situation that ace investigative reportrix, Anne Christine d'Adesky (among others) had seen coming some months ago: Brazil at last would thumb its nose at U.S. threats and begin exporting its high quality generics to neighbors in need. As we used to chant from the streets of Bethesda, Rockville and other exotic locales: the whole world is watching.


Until very recently, the United States government has been strongly allied with big pharma in a tooth-and-nail fight with Brazilian officials to prevent generic competition in the AIDS drug arena. After failing to negotiate drug discounts from multinational patent holders, Brazil, Thailand and Cuba opted to manufacture generics.

What was at stake for big pharma wasn't really the tiny AIDS market in Africa -- which represents only 1% of the billion-dollar AIDS market -- but the larger patent system. Makers of new products or processes are now guaranteed a 20-year market monopoly under a WTO agreement on Trade Related Aspects of Intellectual Property and Public Health, or "TRIPs." U.S. trade officials feared that softening TRIPs' rules for lifesaving HIV medicines in a pandemic would usher in generic competition for other products.

Undeterred, Brazil fought back, arguing that Article 68 of Brazil's 1997 patent law allowed it to make generics to address its national emergency. These drugs -- made only for its national AIDS program, not for export -- do not break patents. In 1990, Brazil, at 170M the second-most populous country in the Western Hemisphere, had an exploding AIDS epidemic -- average survival time was less than six months after a clinical diagnosis. Most citizens lacked access to HIV tests and drugs. In 1993, the private Brazilian company Microbiologics began making generic AZT, and in 1994, the state did the same, providing AZT free through its public health system. AZT prices fell dramatically. By 1997, the government was making ddC and d4T and within two years, other nucleosides were available. In 2000, indinavir was added, then nevirapine.

Brazil's estimated savings on these last two drugs was $80 million, or 30% of total drug costs for the year. By the time of the U.S. WTO challenge in 2001, AIDS drug prices had fallen domestically by 70% -- and so had AIDS deaths. The health system had saved $677 million, and freed up hospital beds. Armed with such positive, cost-effective results, Brazil was cast as a fiery David against the Goliath of greedy big pharma.

Four months after filing the complaint, the U.S. dropped it. And Brazil continued to up the ante, threatening compulsory licensing to negotiate sharp 40% and 65% discounts on patented antiretrovirals from Switzerland's Roche and U.S.-based Merck. Then in November, Brazil helped broker a victory for developing countries at the 146-nation WTO Ministerial Conference in Doha, Qatar. A new ruling guaranteed poorer nations facing national emergencies the right to practice parallel importing or issue compulsory licenses to import or make generic drugs.

But the Doha agreement was only a partial victory, due to a clause banning exports and requiring countries to develop the capacity to manufacture their own generics -- something they all lack. In 2002, WTO members again failed to resolve this hurdle. [Thwarted by the unilateral opposition of the United States.] Consequently, while a full 31 countries have implemented Brazil's treatment and prevention guidelines, only Guyana has adopted its generics model. The Doha clause has effectively prevented the world from following Brazil's lead on generics.

"Why has no country adopted this? We need the agreement of countries," said Paolo Teixeira, the outspoken, outgoing head of the Brazilian Ministry of Health's AIDS program. "We can only say that some countries have tried to consider this and stopped with fear of pressure from the United States." For very poor countries, threatening to withhold foreign aid is an effective weapon.


The Pressure to Export

And yet, U.S. opposition isn't the only reason for the global reluctance to produce generics. In reality, making quality antiretrovirals is neither cheap nor easy, even for richer countries. It requires a substantial investment, an industrial manufacturing base and technical manpower. Aside from Brazil, Thailand and Cuba's state programs, only a half-dozen private companies in India and China meet that criteria for making pills. [NB: Many people receiving Cuban generics -- in Venezuela. Peru, and Ecuador, for example, are understandably concerned over quality assurance issues.]

Globally, not many can even produce the necessary raw materials. Analysts predict a few developing countries will be able to make generic antiretrovirals based on their current industrial capacity and experience. Generics are also a tough business, especially when the local market for AIDS drugs is not well established. Even when companies succeed, generic drug prices may not be cheaper than imported drugs.

In the face of these realities, there has been a growing international demand that Brazil export not just its technical know-how, but also its high quality drugs. But even with possible approval from the WTO, that won't be easy. Brazil still imports 80% of its raw materials from India, which is costly. "Many drugs could be produced in Brazil and a large number are not under patents," said Dr. Norberto Rech, head of the government technology division. Current domestic antiretroviral production, he said, "is insufficient to meet national needs."

Six of 17 public laboratories produce 15 AIDS drugs, and Brazil hopes to add four more by 2005, including two new "fixed-dose" combinations and soon, new fixed-dose drugs for tuberculosis and malaria. But it must buy 13 other antiretrovirals from private companies, nine of which are imported. A single imported brand-name drug -- Viracept (nelfinavir) -- eats up 27% of the current AIDS drug budget.

Brazil's own regulatory drug agency has approved the quality of its state-produced antiretrovirals. But the WHO has not conducted any quality-control inspections of the state factories or laboratories; a critical step for a drug to be included on its list of approved drugs. A WHO inspection is planned for later this year at Far Manguinhos, the state-run generics plant.

"We will not break patents," insisted Teixeira. "We are focusing on the transfer of technology. Our question now is concentrated on how to solve the Doha resolution for developing countries without capacity or production. We are trying to get the WTO to adopt one resolution, for example, where Paraguay can adopt compulsory licensing and ask Brazil to produce, as a way of overcoming these barriers."

With Bush pushing his new international AIDS agenda, Teixeira said, there are hints of the U.S. accepting such a ruling. But critics say even that revision won't do the trick, since countries would still lack political muscle to issue compulsory licenses for generic imports. In September the WTO meets again in Cancún, where a showdown is expected -- along with some resolution.

While awaiting the WTO's decision, Brazil has invested $1 million to set up 10 pilot national antiretroviral production plants, five in Latin America and the Caribbean and five in Africa. It is working closely with the WHO to develop these proof-of-concept projects. Teixeira, a tough negotiator, has also been tapped to assist the WHO's new director, Dr. Jong-Wook Lee, in the agency's goal of treating 3 million people by 2005.

Teixeira began developing a global scale-up plan for AIDS prevention and care based on Brazil's model in May. In July, Lee appointed him as AIDS Program Director at WHO to implement this plan. By then Brazil was starting to transfer technology and send teams from Far Manguinhos to train technicians in places like Guyana and Mozambique. Although Teixeira dismisses talk of pill exports, to an outsider it looks like Brazil is getting ready should the global call come.  


Afterword: Ditching the Doha Clause?

Even as final pre-Cancún trade deals were being brokered between the drug giants and advocates for the poor, Brazil's new health minister Humberto Costa, honoring the hard-nosed bargaining stance of his illustrious predecessor, issued a new ultimatum to Abbott, Merck and Roche, calling for an immediate 50% price cut for Kaletra, Sustiva and Viracept. Government representatives explained that these three drugs -- lopinavir, efavirenz, and nelfinavir -- eat up 63% of Brazil's $172 million budget for antiretrovial AIDS drugs. "If the price remains high, we'll start producing or importing the drugs," representatives from the Brazilian Health Ministry's AIDS division said.

In the post-Teixeira era, Brazil appears to be upping the ante yet again. The government reportedly set a 72-hour deadline for a decision.

Marcia Lage, spokeswoman for the Brazilian Health Ministry's AIDS division, said that a team of health officials would be traveling to India to determine if the drugs could be bought cheaper there than they can be made in Brazil. According to an AP report in the 8/28 Wall Street Journal, Brazil would need to pass new legislation to allow importation of the drugs. And that very bill was being drawn up by Mr. Costa's office.

For pharma's part, Abbott has offered to reduce the price of lopinavir by a whopping 1.3% -- to $1.48 per dose, but Ms. Lage said the drug could be produced at a government-owned laboratory for 25 cents. Roche has already reduced the price of nelfinavir, which is produced by Agouron and marketed outside the United States by the Swiss concern, by 40% -- to 53 cents per dose, but could be manufactured for about half that -- 27 cents a dose -- in Brazil.

Merck's efavirenz fetches a cool $2.10 a dose in Brazil, and could be produced for 87 cents according to Brazilian officials.

The complete text of Anne's report is available at amfAR's Web site: www.amfar.org.


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